ARKADOS GROUP, INC. (Form: 8-K, Received: 05/05/2017 17:31:13)

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 5, 2017 (May 1, 2017)

Arkados Group, Inc.

(Exact name of Company as specified in its charter)

Delaware

000-27587

22-3586087

(State or other jurisdiction

of incorporation)

(Commission File Number)

(IRS Employer Identification No.)

211 Warren Street, Suite 320
Newark, NJ 07103
(Address of principal executive offices)

Telephone: (862) 393-1988
(Registrant's Telephone Number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Company under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

(a) Acquisition of SolBright Renewable Energy, LLC

On May 1, 2017, Arkados Group, Inc., a Delaware corporation (the “Company”) completed an acquisition (the “Asset Purchase”) pursuant to an Asset Purchase Agreement dated May 1, 2017 (the “Asset Purchase Agreement”) with SolBright Renewable Energy, LLC (“SolBright”), pursuant to which the Company has acquired substantially all of the assets, and certain specified liabilities, of SolBright used in the operation of SolBright’s solar engineering, procurement and construction business (the “SolBright Assets”, the transaction shall collectively be referred to herein as the “Acquisition”). The Asset Purchase Agreement and the Acquisition were approved by the board of directors of the Company and the sole manager and members of SolBright.

In consideration for the purchase of the SolBright Assets, the Company delivered to SolBright (i) $3,000,000 in cash (the “Cash Payment”), (ii) a Senior Secured Promissory Note in the principal amount of $2,000,000 (the “Secured Promissory Note”), described below, (iii) a Convertible Promissory Note in the principal amount of $6,000,000 (“Preferred Stock Note”), described below, and (iv) the Common Stock Consideration, described below.

The Secured Promissory Note matures on May 1, 2020 barring any events of default, an equity financing in which the Company issues equity securities which yield gross cash proceeds to the Company of at least $10,000,000 (excluding redeemable or convertible notes) or a change of control of the Company. The Company shall make prepayments of principal on a quarterly basis pursuant to the terms of the Secured Promissory Note if such funds are available. The Secured Promissory Note bears interest at 15% per annum, payable on a quarterly basis with the first payment due on May 31, 2017. The Secured Promissory Note is secured with a second priority lien on the accounts receivable of the Company relating to the solar engineering, procurement and construction business of SolBright acquired by the Company pursuant to the Asset Purchase Agreement, with such lien being junior only to the first priority security position granted pursuant to the Note Purchase Agreement and the Security Agreement, both dated May 1, 2017, described in (b) below.

The Preferred Stock Note matures on July 31, 2018 barring any demands following an event of default, provided that the Company shall make prepayments of principal on a quarterly basis pursuant to the terms of the Preferred Stock Note if such funds are available. The Preferred Stock Note bears interest at 4% per annum, provided that upon and during an event of default it shall bear interest at 12% per annum. Interest is payable quarterly in arrears commencing on May 1, 2017 and on the first business day of each August, November, February and May thereafter. The Preferred Stock Note will automatically convert on the date that the Company’s Certificate of Designation is filed with the State of Delaware’s Secretary of State and becomes effective into a number of shares of the Company’s Series A 4% Convertible Preferred Stock, par value $0.0001 per share, equal to the outstanding principal and interest on the Preferred Stock Note divided by $1.50 per share, as adjusted for any stock splits, stock dividends, recapitalizations, combinations and the like that may occur prior to such conversion. The Company has agreed in the Asset Purchase Agreement to take the actions required for the automatic conversion of the Preferred Stock Note promptly following the closing of the Asset Purchase.

In connection with the Asset Purchase Agreement, and in addition to the consideration represented by the Cash Payment, the Secured Promissory Note and the Preferred Stock Note, the Company issued to SolBright 4,000,000 shares of Company’s common stock at one dollar per share (the “Common Stock Consideration”). The Common Stock Consideration is subject to antidilution protection if, within 120 days of the closing of the Asset Purchase, the Company sells shares of its common stock at a price per share that is less than one dollar per share, in which case the Company shall issue additional shares of common stock to SolBright so that the total number of shares the Company has issued to SolBright equals $4,000,000 divided by such lower price per share.

The Asset Purchase Agreement contained customary representations, warranties and covenants of the Company and SolBright.

A copy of the Asset Purchase Agreement, Secured Promissory Note and the Preferred Stock Note are attached as Exhibits 2.1, 10.1 and 10.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference. The foregoing description of the Asset Purchase Agreement, Secured Promissory Note and the Preferred Stock Note is qualified in its entirety by reference to the full text of the Asset Purchase Agreement, Secured Promissory Note and the Preferred Stock Note filed with this Current Report on Form 8-K.

The Asset Purchase Agreement has been included to provide investors with information regarding the terms of the transactions contemplated thereby. The Asset Purchase Agreement is not intended to provide any other factual information about the Company, SolBright or their respective subsidiaries or affiliates. The Asset Purchase Agreement contains representations and warranties of the Company and SolBright. The assertions embodied in those representations and warranties were made for purposes of the Asset Purchase Agreement and are qualified by information in confidential disclosure schedules that the parties have exchanged in connection with the execution of the Asset Purchase Agreement. The disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Asset Purchase Agreement. In addition, certain representations and warranties were made as of a specific date may be subject to a contractual standard of materiality different from what an investor might view as material, or may have been used for purposes of allocating risk between the respective parties rather than establishing matters as facts. Accordingly, you should read the representations and warranties in the Asset Purchase Agreement not in isolation but only in conjunction with the other information about the Company, SolBright and their respective subsidiaries that are included in reports, statements and other filings made by the Company with the Securities and Exchange Commission (the “SEC”).

(b) AIP Financing

On May 1, 2017, the Company completed a financing transaction with AIP Asset Management Inc. (the “Security Agent”), AIP Global Macro Fund, LP (“AGMF”), AIP Global Macro Class (“AGMC”) and AIP Canadian Enhance Income Class (“ACEIC” and together with AGMF and AGMC, collectively, “AIP”), pursuant to which the Company raised additional capital by issuing 10% Secured Convertible Promissory Notes (the “10% Notes”) in the aggregate principal amount of $2,500,000 to AIP and AIP Private Capital Inc. (collectively, the “Holders”) in accordance with the terms of the Note Purchase Agreement dated May 1, 2017 (the “Purchase Agreement”) with AIP (the “AIP Financing”). In connection with the issuance of the 10% Notes, the Company and its subsidiaries entered into a Security Agreement dated May 10, 2017 (the “Security Agreement”) with the Security Agent, pursuant to which the Company granted the Security Agent a security interest in substantially all assets of the Company and its subsidiaries. In addition, pursuant to the Note Purchase Agreement, the Company issued warrants (the “AIP Warrants”) to the Holders to purchase 2,500,000 shares of the Company’s common stock, subject to adjustment for certain events, such as stock splits and stock dividends, at an exercise price of $1.00 per share, and which have three year terms.

The principal amount of the 10% Notes exceeds the cash consideration paid by the Holders for such notes, with such excess representing a 15% original issue discount. The 10% Notes mature on May 1, 2018 unless earlier converted pursuant to the terms of the Purchase Agreement. The 10% Notes bear interest at 10% per annum, provided that during an Event of Default (as defined in the Purchase Agreement) it shall bear interest at 20% per annum, payable on a monthly basis. The 10% Notes are secured with a first priority lien as set forth in the Security Agreement. The outstanding principal and interest under the 10% Notes is convertible at the option of the Holder of each Note into shares of the Company’s common stock at $0.80 per share, or $0.60 if the Company has not raised $500,000 in the 90 days following the closing, or, upon an uncured Event of Default (as defined in the Purchase Agreement), the lesser of the closing bid of the Company’s common stock on the day notice of conversion is given or 75 percent of the price of Shares in any registered offering.

In connection with the AIP Financing, the Company and the Holders entered into a Registration Rights Agreement under which the Company is required, in no event later than 75 calendar days after the closing of the AIP Financing, to file a registration statement with the SEC covering the resale of the shares of the Company’s common stock issuable pursuant to the 10% Notes and the Warrants and to use reasonable best efforts to have the registration declared effective as soon as practicable, but in no event later than 120 days after the closing of the AIP Financing. The Company will be subject to certain monetary penalties, as set forth in the Registration Rights Agreement, if the registration statement is not filed, does not become effective on a timely basis, or does not remain available for the resale (subject to certain allowable grace periods) of the Registrable Securities, as such term is defined in the Registration Rights Agreement.

The foregoing does not purport to be a complete description of the Purchase Agreement, the 10% Notes, the Security Agreement, the Registration Rights Agreement or the AIP Warrants and is qualified in its entirety by reference to the full text of such documents, which are filed as Exhibits 10.3, 10.4, 10.5, 10.6, and 10.7, respectively, hereto.

(c) Note and Warrant Financing

On May 1, 2017, the Company closed a private placement (the “Private Placement”) of approximately $899,999 principal amount of 9% Convertible Promissory Notes (the “9% Notes”) and Common Stock Purchase Warrants (the “Warrants”) issued to L2 Capital LLC (“L2”) and SBI Investments LLC 2014-1 (“SBI” and together with L2, the “Investors”). A Note and a Warrant was issued pursuant to a Securities Purchase Agreement, dated May 1, 2017, with each Investor, in substantially the same form (each, a “Securities Purchase Agreement”).

The 9% Notes mature on November 1, 2017 unless earlier converted pursuant to the terms of the Securities Purchase Agreement. The 9% Notes bear interest at 9% per annum. The outstanding principal and interest under the 9% Notes, solely upon an Event of Default (as defined in the 9% Notes), is convertible at the option of the Holder of each Note into shares of the Company’s common stock as set forth in the 9% Notes.

As a part of the Private Placement, the Company issued Warrants to the Investors providing them with the right to purchase up to an aggregate of 1,279,998 shares of the Company’s common stock at an initial exercise price equal to the lesser of (i) $0.60 and (ii) 75% of the offering price of the Company’s common stock in the Company’s next publicly registered offering, subject to adjustment for certain events, such as stock splits and stock dividends. Subject to certain limitations, the Warrants are exercisable on any date after the date of issuance for a term of five years.

The foregoing does not purport to be a complete description of the Securities Purchase Agreements, the 9% Notes and the Warrant and is qualified in its entirety by reference to the full text of such documents, which are filed as Exhibits 10.8, 10.9 and 10.7, respectively, hereto.

(d) Common Stock and Warrant Financing

On May 1, 2017, the Company closed a private placement (the “Private Placement”) of approximately 1,783,335 shares of the Company’s common stock and Common Stock Purchase Warrants to purchase 1,783,335 shares of the Company’s common stock (the “Warrants”) issued to various investors (the “Investors”), each pursuant to a Securities Purchase Agreement, dated May 1, 2017, with each Investor, in substantially the same form (each, a “Securities Purchase Agreement”).

As a part of the Private Placement, the Company issued Warrants to the Investors providing them with the right to purchase up to an aggregate of 1,783,335 shares of the Company’s common stock at an exercise price equal to one dollar, subject to adjustment for certain events, such as stock splits and stock dividends. Subject to certain limitations, the Warrants are exercisable on any date after the date of issuance for a term of three years.

The foregoing does not purport to be a complete description of the Securities Purchase Agreements and the Warrants and is qualified in its entirety by reference to the full text of the form of such documents, which are filed as Exhibits 10.15 and 10.7, respectively, hereto.

Item 2.01 Completion of Acquisition or Disposition of Assets

Reference is made to the disclosures set forth under Item 1.01(a) of this Current Report on Form 8-K, which disclosures are incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

Reference is made to the disclosures set forth under Item 1.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference

Item 3.02. Unregistered Sales of Equity Securities.

(a) Reference is made to the disclosures set forth under Item 1.01(a) of this Current Report on Form 8-K, which disclosures are incorporated herein by reference.

The issuance of the shares of the Company’s common stock, the Senior Secured Note and Preferred Stock Notes (and securities issuable upon conversion thereof) in connection with the Asset Purchase Agreement as described above is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 4(2) of the Securities Act and Regulation D promulgated under the Securities Act (“Regulation D”). Prior to the issuance of the Company’s common stock, the Senior Secured Note and Preferred Stock Notes, SolBright made certain representations to the Company as required by Regulation D. The Company has not and will not engage in general solicitation or advertising with regard to the issuance of the shares of the Company’s common stock, the Senior Secured Note and the Preferred Stock Notes (and securities issuable upon conversion thereof) pursuant to the Asset Purchase Agreement and has not and will not offer securities to the public in connection with the issuance of the shares of the Company’s common stock, the Senior Secured Note and the Preferred Stock Notes (and securities issuable upon conversion thereof).

(b) Reference is made to the disclosures set forth under Item 1.01(b) of this Current Report on Form 8-K, which disclosures are incorporated herein by reference.

The issuance of the 10% Notes and the AIP Warrants (and securities issuable upon conversion thereof) in connection with the Purchase Agreement as described above is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 4(2) of the Securities Act and Regulation D. Prior to the issuance of 10% Notes and the AIP Warrants (and securities issuable upon conversion thereof), the Holders made certain representations to the Company as required by Regulation D. The Company has not and will not engage in general solicitation or advertising with regard to the issuance of 10% Notes and the AIP Warrants (and securities issuable upon conversion thereof) pursuant to the Purchase Agreement and has not and will not offer securities to the public in connection with the issuance of the 10% Notes and the AIP Warrants (and securities issuable upon conversion thereof).

(c) Reference is made to the disclosures set forth under Item 1.01(c) of this Current Report on Form 8-K, which disclosures are incorporated herein by reference.

The issuance of the 9% Notes and the Warrants (and securities issuable upon conversion thereof) in connection with the Securities Purchase Agreements as described above is exempt from the registration requirements of the Securities Act pursuant to Section 4(2) of the Securities Act and Regulation D. Prior to the issuance of 9% Notes and the Warrants (and securities issuable upon conversion thereof), the Holders made certain representations to the Company as required by Regulation D. The Company has not and will not engage in general solicitation or advertising with regard to the issuance of the 9% Notes and the Warrants (and securities issuable upon conversion thereof) pursuant to the Purchase Agreement and has not and will not offer securities to the public in connection with the issuance of the 9% Notes and the Warrants (and securities issuable upon conversion thereof).

(d) Reference is made to the disclosures set forth under Item 1.01(d) of this Current Report on Form 8-K, which disclosures are incorporated herein by reference.

The issuance of the shares of the Company’s common stock and the Warrants (and securities issuable upon conversion thereof) in connection with the Securities Purchase Agreements as described above is exempt from the registration requirements of the Securities Act pursuant to Rule 506 of the Securities Act and Regulation D. Prior to the issuance of the shares of the Company’s common stock and the Warrants, the Holders made certain representations to the Company as required by Regulation D. The Company has not and will not engage in general solicitation or advertising with regard to the issuance of the shares of the Company’s common stock and the Warrants (and securities issuable upon conversion thereof) pursuant to the Purchase Agreement and has not and will not offer securities to the public in connection with the issuance of the shares of the Company’s common stock and the Warrants (and securities issuable upon conversion thereof).

Item 9.01 Financial Statement and Exhibits

(a)

Financial statements of business acquired.

As permitted by Item 9.01(a)(4) of Form 8-K, the Company will file the financial statements required by Item 9.01(a)(1) of Form 8-K pursuant to an amendment to this Current Report on Form 8-K not later than seventy-one (71) calendar days after the date this initial Current Report on Form 8-K reporting the acquisition of SolBright was required to be filed.

(b)

Pro forma financial information.

As permitted by Item 9.01(b)(2) of Form 8-K, the Company will file the pro forma financial information required by Item 9.01(b)(1) of Form 8-K pursuant to an amendment to this Current Report on Form 8-K not later than seventy-one (71) calendar days after the date this initial Current Report on Form 8-K reporting the acquisition of SolBright was required to be filed.

(c) Exhibits.

Exhibit No.		Description
2.1*		Asset Purchase Agreement by and between the Company and SolBright Renewable Energy, LLC dated May 1, 2017
10.1 *		15% Secured Promissory Note issued to SolBright Renewable Energy, LLC dated May 1, 2017
10.2*		Convertible Promissory Note issued to SolBright Renewable Energy, LLC dated May 1, 2017
10.3 *		Note Purchase Agreement by and among the Company, AIP Asset Management Inc. and the Holders identified therein dated May 1, 2017
10.4*		Form of 10% Secured Convertible Note dated May 1, 2017
10.5*		Security Agreement by and among Company, its Subsidiaries and AIP Management Inc. dated May 1, 2017
10.6*		Registration Rights Agreement by and between the Company and the investors identified therein dated May 1, 2017
10.7*		Form of Warrant dated May 1, 2017
10.8*		Form of Securities Purchase Agreement by and between the Company and the Buyer identified therein dated May 1, 2017
10.9*		Form of Promissory Note dated May 1, 2017
10.10		Form of Securities Purchase Agreement by and between the Company and certain accredited investors dated April 6, 2017 ( incorporated by reference from the Registrant’s Form 10-Q filed on April 21, 2017 )

* Furnished herewith.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Arkados Group, Inc. (Registrant)

Date: May 5, 2017	By:	/s/ Terrence DeFranco
		Terrence DeFranco Chief Executive Officer

Additional Information About The Asset Purchase and Forward-Looking Statements

This document contains forward-looking statements concerning the Asset Purchase, future financial and operating results, benefits and synergies of the Asset Purchase, future opportunities for the combined businesses and any other statements regarding events or developments that the parties believe or anticipate will or may occur in the future. Risks and uncertainties may cause actual results and benefits of the Asset Purchase to differ materially from management expectations. Potential risks and uncertainties include, among others: general economic conditions and conditions affecting the industries in which the Company and SolBright operate. Additional information regarding the factors that may cause actual results to differ materially from these forward-looking statements is available in the Company’s SEC filings, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and Quarterly Report on Form 10-Q for the quarterly period ending March 31, 2017. These forward-looking statements speak only as of the date of this communication and the Company assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise, except as required by law.

This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.

Exhibit 2.1

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (the “ Agreement ”) is made this 1 ^st day of May, 2017 (the “ Effective Date ”), by and between Arkados Group, Inc. (“ Buyer ”), a Delaware corporation, with an address of 211 Warren Street, Suite 320, Newark, NJ 07103, and SolBright Renewable Energy, LLC (“ Seller ”), a South Carolina limited liability company, with an address of 701 East Bay Street, Suite 302, Charleston, SC 29403.

WHEREAS , Seller desires to sell, and Buyer desires to purchase, on the terms and subject to the conditions in this Agreement, certain of the Seller’s assets, tangible and intangible, required for operating the Seller’s solar engineering, procurement and construction businesses (the “ Business ”), in exchange for the consideration set forth herein. The transaction referred to in this Agreement shall hereinafter be the “ Acquisition ”. Certain defined terms used in this Agreement shall have the meanings ascribed to them in Schedule 1.1 .

NOW, THEREFORE , in consideration of the foregoing and of the respective promises, representations, warranties and covenants herein contained, the parties hereto, intending to be legally bound, do hereby agree as follows:

Purchase of the Assets by the Buyer; Assumption of Liabilities.

1.1 Agreement to Sell . At the Closing, effective at 12:01 AM on the Closing Date, the Seller shall sell, grant, convey, transfer, assign and deliver to the Buyer, upon the terms and subject to the conditions of this Agreement, free and clear of all Encumbrances, other than Permitted Encumbrances, all of the Seller’s right, title and interest in, to and under the following assets (the “ Assets ”) used in the operation of the Business:

(a) The projects listed on Schedule 1.1(a) (the “ Seller Projects ”).

(b) All content, including articles, used or previously used in the Business listed in Schedule 1.1(b).

(d) All hardware and software owned by Seller or which are leased by the Seller and utilized in the Business, as listed on Schedule 1.1(d) hereto (such hardware and software leased by the Seller being the “ Business Leases ” and, together with the hardware and software owned by the Seller being the “ Business Rights ”).

(e) The equipment relating to the Business listed on Schedule 1.1(e) (the “ Equipment ”).

(f) All authorizations and Permits issued by any regulatory authority or agency required for the conduct of the Business as currently conducted or for the ownership of the Assets (collectively, the “ Licenses ”), as listed on Schedule 1.1(f).

(g) All IP addresses used in the Business, as listed on Schedule 1.1(g).

(h) All of the Seller’s right, title and interest to the Transferred Contracts listed on Schedule 1.1(h).

(i) The net cash balance set forth on Schedule 1.1(i) , but only in the event the net cash balance in the total line of the “Net Cash In/(Out)” column is a positive amount;

(j) All prepaid expenses, credits, advance payments, claims, security, refunds, rights of recovery, rights of set-off, rights of recoupment, deposits, charges, sums and fees (including any such item relating to the payment of Taxes), except to the extent related to any of the Excluded Assets;

(k) All rights to any Actions of any nature available to or being pursued by Seller to the extent related to the Business, the Assets or the Assumed Liabilities, whether arising by way of counterclaim or otherwise, except to the extent related to any of the Excluded Assets.

(l) All of Seller’s rights under warranties, indemnities and all similar rights against third parties to the extent related to any Assets.

(m) All insurance benefits, including rights and proceeds, arising from or relating to the Business, the Assets or the Assumed Liabilities, except to the extent related to any of the Excluded Assets.

(n) All (i) lists, records and other information of the Seller pertaining to suppliers and customers of the Business, (ii) lists, records and other information of the Seller pertaining to accounts, personnel and referral sources related to the Business, (iii) all drawings, plats, specifications, reports, studies, plans, books, ledgers, files, documents, manuals, correspondence, business and accounting records of every kind (including all financial, business and marketing plans) and other materials of, or maintained for, the Business, (iv) advertising, marketing and promotional materials related to the Business, and (v) all other printed or written materials, in each case owned by the Seller, in any form or medium, related to the Business (the “ Acquired Records ”).

(o) All rights and goodwill in and to the Seller Names and the Assigned Rights.

1.2 Agreement to Purchase . At the Closing, effective at the Effective Time, the Buyer shall purchase from the Seller, upon the terms and subject to the conditions of this Agreement and in reliance upon the representations and warranties of the Seller in this Agreement and the Schedules attached hereto, the Assets to be acquired and, as consideration therefor, shall pay to the Seller the Purchase Price for the Assets as set forth in Section 2.1.

1.3 Excluded Assets . Nothing contained herein to the contrary shall, or shall be deemed to, transfer to Buyer any assets or properties of the Seller other than those Assets referenced in Section 1.1, and the Seller hereby retains all right, title and interest to, in and under all such assets and properties not referenced in Section 1.1 (collectively, the “ Excluded Assets ”), including without limitation: (a) the assets, properties and rights specifically set forth in Schedule 1.3(a) ; (b) any payments received or to be received with respect to the Business in connection with the excluded projects set forth on Schedule 1.3(b) (the “ Excluded Projects ”); (c) the accounts receivable relating to the Excluded Projects as of the Closing Date; (d) any insurance policies; (e) any pension, profit-sharing or cash or deferred (Section 401(k)) plans and trusts and assets thereof, and any other Employee Benefit Plan or arrangement of Seller; (f) any interest in and to any refunds of federal, state and local franchise, income and other Taxes of Seller for periods prior to the Effective Time; (g) any minute books and stock (or its equivalent) record books; (h) any employment identification numbers, local licensing numbers, and state tax identification numbers; (i) any cash and debts due and owing to Seller, including without limitation, the Buyer Note; (j) the right of Seller to claims for refunds of Taxes and other governmental charges, security deposits, bonds and similar assets of whatever nature, (but only to the extent such Taxes and other governmental charges relate to Taxes or other governmental charges that were paid by Seller prior to or on the Closing Date); (k) the Seller’s rights under this Agreement and any documents delivered in connection with this Agreement; (l) the Seller’s subsidiaries, including without limitation Brandywick, LLC and its assets, (m) the solar assets previously installed by Seller at the Church of the Holy Cross on Sullivans Island, South Carolina, and (n) the Buyer Note and any proceeds thereof.

Buyer acknowledges that Seller is retaining certain Excluded Projects as referenced above, which projects are nearing completion. In order to assist Seller with the activities necessary to complete and close-out such projects, Buyer hereby agrees that Seller is entitled to utilize, pursuant to a Consulting Agreement to be entered into between Buyer and Seller in the form attached hereto as Exhibit 1.3 , certain of the Assets referenced in Section 1.1(c), (d), (e), (f), (h), (n) and (o) for a limited period of time, not to exceed ninety (90) days after the Closing Date as necessary for the completion and close-out of such projects, which period of time may be extended by the mutual agreement of the parties.

1.4 Fees Received by Seller; Billing Information . All fees for services rendered by Buyer on or after the Effective Time received by Seller after the Effective Time shall be paid directly to Buyer no later than fifteen (15) business days after receipt of such funds along with an itemized listing of the source of such funds and to what the funds relate (if known). All fees for services rendered by Seller related to the Excluded Projects received by Buyer shall be paid directly to Seller by Buyer no later than fifteen (15) business days after receipt of such funds, along with an itemization listing of the source of such funds and to what the funds related (if known). Seller shall deliver to Buyer complete copies of all billing information relating to the Assets at the Closing.

1.5 Limited Assumption of Liabilities . Buyer, pursuant to this Agreement, on the terms and subject to the conditions set forth herein, hereby agrees to assume, pay, perform and discharge when due the following liabilities of the Seller (collectively, the “ Assumed Liabilities ”): (a) all Liabilities of the Seller arising out of related to or in connection with the ownership, operation, utilization or maintenance of the Assets to the extent that such Liabilities relate to and arise from and after the Effective Time, (b) all Liabilities of Seller under the Contracts to the extent that such Liabilities relate to and arise from and after the Effective Time and do not relate to any failure to perform, improper performance, warranty or other breach, default or violation by Seller prior to the Closing, and (c) Liabilities for the expenses and payables listed on Schedule 1.5(c) to the extent such payables were incurred in the ordinary course of business. Except for the Assumed Liabilities, Buyer shall not be deemed to have assumed any liability, debt, obligation, or responsibility of Seller, whether fixed or contingent, whether known or unknown. All of the Liabilities of Seller other than the Assumed Liabilities shall be retained by Seller, which shall remain solely responsible therefor. As of the Effective Time, Buyer shall assume and be solely responsible for the Assumed Liabilities as set forth above.

1.6 Excluded Liabilities . Notwithstanding the provisions of Section 1.5 or any other provision in this Agreement to the contrary, Buyer shall not assume and shall not be responsible to pay, perform or discharge any Liabilities of Seller or any of its Affiliates of any kind or nature whatsoever other than the Assumed Liabilities (the “ Excluded Liabilities ”). Seller shall, and shall cause each of its Affiliates to, pay and satisfy in due course all Excluded Liabilities which they are obligated to pay and satisfy. Without limiting the generality of the foregoing, the Excluded Liabilities shall include, but not be limited to, the following:

(a) any Liabilities of Seller arising or incurred in connection with the negotiation, preparation, investigation and performance of this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, including, without limitation, fees and expenses of accountants, consultants, advisers and others; provided, however, it is understood and agreed that in connection with the Closing, Buyer shall pay to Seller the fees and expenses of Seller’s counsel in connection with the Acquisition not to exceed seventy-five thousand dollars ($75,000);

(b) any Liability for (i) Taxes of Seller (or any stockholder or Affiliate of Seller) or relating to the Business, the Assets or the Assumed Liabilities for any period prior to the Closing; (ii) Taxes that arise out of the consummation of the transactions contemplated hereby or that are the responsibility of Seller pursuant to Section 14.3; or (iii) other Taxes of Seller (or any stockholder or Affiliate of Seller) of any kind or description (including any Liability for Taxes of Seller (or any stockholder or Affiliate of Seller) that becomes a Liability of Buyer under any common law doctrine of de facto merger or transferee or successor liability or otherwise by operation of contract or Law);

(d) any Liabilities in respect of any pending or threatened Action arising out of, relating to or otherwise in respect of the operation of the Business or the Assets to the extent such Action relates to such operation prior to the Closing;

(e) any product Liability or similar claim for injury to a Person or property which arises out of or is based upon any express or implied representation, warranty, agreement or guaranty made by Seller, or by reason of the improper performance or malfunctioning of a product, improper design or manufacture, failure to adequately package, label or warn of hazards or other related product defects of any products at any time manufactured or sold or any service performed by Seller;

(f) any recall, design defect or similar claims of any products manufactured or sold or any service performed by Seller;

(g) any Liabilities of Seller arising under or in connection with any Employee Benefit Plan providing benefits to any present or former employee of Seller;

(h) any Liabilities of Seller for any present or former employees, officers, directors, retirees, independent contractors or consultants of Seller, including, without limitation, any Liabilities associated with any claims for wages or other benefits, bonuses, accrued vacation, workers’ compensation, severance, retention, termination or other payments;

(i) any Environmental Claims, or Liabilities under Environmental Laws, to the extent arising out of or relating to facts, circumstances or conditions existing prior to the Closing to the extent arising out of any actions or omissions of Seller;

(j) except to the extent listed on Schedule 1.5(c), any trade accounts payable of Seller;

(k) any Liabilities of the Business relating or arising from unfulfilled commitments, quotations, purchase orders, customer orders or work orders that are not validly and effectively assigned to Buyer pursuant to this Agreement;

(l) any Liabilities to indemnify, reimburse or advance amounts to any present or former officer, director, employee or agent of Seller (including with respect to any breach of fiduciary obligations by same), except for indemnification of same pursuant to Section 10.3 as Seller Indemnitees;

(m) any Liabilities under any Transferred Contracts (i) which are not validly and effectively assigned to Buyer pursuant to this Agreement; or (ii) to the extent such Liabilities arise out of or relate to any action or omission by Seller of such Transferred Contracts prior to Closing;

(n) any Liabilities associated with debt, loans or credit facilities of Seller and/or the Business owing to financial institutions; and

(o) any Liabilities arising out of, in respect of or in connection with the failure by Seller or any of its Affiliates to comply with any Law or Governmental Order.

Purchase Price .

2.1 Amount of Purchase Price. The total purchase price to be paid by Buyer to Seller for the Assets shall consist of (i) cash in the amount of three million dollars ($3,000,000) (the “ Cash Consideration ”), (ii) the Buyer Note, (iii) the Buyer Stock Consideration, (iv) the Buyer Preferred Stock Note, (v) the Assumed Liabilities and (vi) the Cash Adjustment as determined in accordance with Section 2.6, if applicable (collectively, the “ Purchase Price ”). The Purchase Price shall be payable to Seller as set forth in this Section 2.

2.2 Payment of Purchase Price.

(a) Subject to the terms and conditions of this Agreement, at the Closing, Buyer will deliver to Seller the Cash Consideration and, if applicable, the Cash Adjustment.

(b) Subject to the terms and conditions of this Agreement, at the Closing, Buyer will deliver to Seller the Buyer Note.

(c) Subject to the terms and conditions of this Agreement, at the Closing, Buyer will deliver to Seller the Buyer Stock Consideration.

(d) Subject to the terms and conditions of this Agreement, at the Closing, Buyer will deliver to Seller the Buyer Preferred Stock Note.

(e) Subject to the terms and conditions of this Agreement, at the Closing, Buyer will agree to be responsible for and satisfy the Assumed Liabilities.

2.3 Allocation of Purchase Price . The Purchase Price (plus other relevant items) shall be allocated among the Assets according to an allocation to be mutually agreed upon by the parties as set forth in Schedule 2.3.

2.4 Withholding Tax. Buyer shall be entitled to deduct and withhold from the Purchase Price all Taxes that Buyer is required to deduct and withhold under any provision of Tax Law. All such withheld amounts shall be treated as delivered to Seller hereunder.

2.5 Third Party Consents . To the extent that Seller’s rights under any Transferred Contract or Permit constituting an Asset, or any other Asset, may not be assigned to Buyer without the consent of another Person which has not been obtained prior to Closing, this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful, and Seller, at its expense, shall use its reasonable best efforts to obtain any such required consent(s) as promptly as possible. With respect to the Required Consents, in the event any such Required Consent is not obtained and delivered to Buyer by the date noted on Schedule 8.3 for such Required Consent, and in the event the failure to obtain such consent will have a material negative impact on the Buyer’s net profit realized related to the Business, then the parties shall in good faith negotiate an adjustment to the Purchase Price to compensate the Buyer for such loss of net profit, and shall document such mutual agreement through an amendment to this Agreement; provided, however, in the event the Seller obtains such Required Consent at any time, then such negotiations of an adjustment to the Purchase Price shall cease. If any such consent shall not be obtained or if any attempted assignment would be ineffective or would impair Buyer’s rights under the purchased Asset in question so that Buyer would not in effect acquire the benefit of all such rights, Seller, to the maximum extent permitted by Applicable Law and the Asset, shall act after the Closing as Buyer’s agent in order to obtain for it the benefits thereunder and shall cooperate, to the maximum extent permitted by Applicable Law and the Asset, with Buyer in any other reasonable arrangement designed to provide such benefits to Buyer. Notwithstanding any provision in this Section 2.4 to the contrary, Buyer shall not be deemed to have waived its rights under Section 8.3 hereof unless and until Buyer either provides written waivers thereof or elects to proceed to consummate the transactions contemplated by this Agreement by proceeding with the Closing.

2.6 Net Cash Balance. In the event the net cash balance reflected in the total line of the “Net Cash In/(Out)” column on Schedule 1.1(i) , is a negative amount, Buyer shall pay to Seller at Closing such amount, but for purposes of this Section 2.6 such amount shall be expressed as a positive number and reflected as an increase in the Purchase Price. The amount to be so paid pursuant to this Section 2.6 shall be referred to herein as the “Cash Adjustment.”

The Closing; Transfer Procedures .

3.1 Closing.

(a) Subject to the terms and conditions of this Agreement, the Closing shall take place via electronic exchange of executed final documents the next business day after the conditions to closing in Section 8 and Section 9 of this Agreement have been satisfied or such other date as mutually agreed by the parties (the “ Closing Date ”). The Closing under this Agreement is expressly contingent upon satisfaction or waiver, before Closing, of the conditions set forth in Sections 8 and 9 of this Agreement and the satisfaction of the delivery requirements under Sections 3.2 and 3.3 hereof. Time is of the essence for all obligations of all parties under this Agreement.

(b) Effective immediately upon the Closing, the Seller shall cease using Seller Names as or as part of any trademark (including its corporate name) or in any other manner and shall make all filings necessary to effect such changes.

(c) Within five (5) days after the Closing Date, the Seller shall file a certificate to change its corporate name to a corporate name which does not include, has no references to, and is not a confusingly similar derivative or variation of the Seller Names, and make all other filings necessary to effect such name change, and as promptly as practical thereafter (but in no event more than fifteen (15) days thereafter), withdraw all fictitious name filings and/or “doing business as” filings that include or contain a reference to the Seller Names. In each case, the Seller shall provide a copy of the evidence of name change or withdrawal to the Buyer promptly upon the Seller’s receipt of such evidence.

(d) Following the Closing the Seller shall, and shall cause each of its Affiliates to, take all actions reasonably requested by the Buyer to clarify and confirm that the Seller and its Affiliates are not affiliated with the Buyer and its Affiliates, including an inclusion on its Internet website a statement of reasonable prominence acceptable to the Buyer to the effect that the Seller is not affiliated with the Buyer and its Affiliates and a hyperlink to an Internet domain name of the Buyer provided by the Buyer.

3.2 Seller Deliveries. At the Closing, the Seller shall deliver to the Buyer the following:

(a) Bill of Sale and Documents of Title. A duly executed Bill of Sale in the form attached hereto as Exhibit 3.2(a) , and all other instruments of sale, assignment and transfer as are reasonably necessary or appropriate to sell, assign and transfer to the Buyer (and to vest in the Buyer) all of Seller’s right, title and interest in and to the Assets, in recordable form, where appropriate, in form and substance reasonably acceptable to the Buyer and the Seller.

(b) An Assignment and Assumption Agreement attached hereto as Exhibit 3.2(b) , duly executed by the Seller, assigning to Buyer all rights and obligations of Seller and its Affiliates in and to all of the Assumed Liabilities and Transferred Contracts, exclusive of any Excluded Liabilities.

(c) Copies of executed estoppel certificates or assignments for Transferred Contracts and payables which require such assignment.

(d) An assignment of all Assigned Rights and rights and goodwill in the Seller Names in the form attached hereto as Exhibit 3.2(d), duly executed by the Seller.

(e) Copies of the written consents of third parties as listed on Schedule 3.2(e) (the “ Required Consents ”).

(f) All necessary releases of liens and Uniform Commercial Code termination statements in forms reasonably acceptable to the Buyer’s counsel so that the Seller’s title to the Assets is free and clear of all Encumbrances other than Permitted Encumbrances.

(g) A certificate of good standing with respect to the Seller issued by the Secretary of State of South Carolina as of a date not more than five (5) days prior to the Closing Date.

(h) A copy of the written consent or resolutions of the Seller’s board of directors or managers and the written consent of the Seller’s members, certified by the Secretary of the Seller as having been duly and validly adopted and being in full force and effect, authorizing the execution and delivery of this Agreement and the other Transaction Documents to which the Seller is a party and the performance by the Seller of its obligations hereunder and thereunder.

(i) The Acquired Records, including keys, locks combination codes, contact information and other information which would be required to access the Business Rights.

(j) Employment agreements for Key Employees, including Patrick Hassell, in the form of Exhibit 3.2(j) annexed hereto and such non-competition, non-disclosure and non-solicitation agreements, as reasonably required by Buyer, each duly executed by the Key Employees.

(k) Assignments, in the form annexed hereto as Exhibit 3.2(k) reasonably acceptable to Buyer and Seller and, if applicable, as required by any Governmental Authority with which Seller’s or any of its Affiliates’ rights to any Intellectual Property to be assigned to Buyer have been filed, assigning to Buyer such Intellectual Property.

(l) The Consulting Agreement, duly executed by the Buyer and Seller.

(m) Copies of invoices or confirmation of amounts due to vendors as shown on Schedule 1.5(c) as Assumed Liabilities.

(n) A duly executed certification that Seller is not a foreign Person within the meaning set forth in Treasury Regulation Section 1.1445-2(b)(2)(iii)(A); it being understood that notwithstanding anything to the contrary contained herein, if Seller fails to provide Buyer with such certification, Buyer shall be entitled to withhold the requisite amount from the Purchase Price in accordance with Section 1445 of the Code and the applicable Treasury Regulations.

(o) Such other customary instruments of transfer, assumption, filings or documents, in form and substance reasonably satisfactory to Buyer, as may be required to give effect to this Agreement.

3.3 Buyer Deliveries. At the Closing, the Buyer shall deliver, or shall cause to be delivered, to the Seller as indicated below, the following:

(a) The Cash Consideration and, if applicable, the Cash Adjustment, plus an amount as payment for Seller’s legal fees and expenses of the transaction.

(b) Reserved.

(d) An Assignment and Assumption Agreement attached hereto as Exhibit 3.2(b) , duly executed by the Buyer, pursuant to which the Buyer shall assume all of the Assumed Liabilities.

(e) The Buyer Note and the Buyer Preferred Stock Note, each duly executed by Buyer.

(f) Release instructions for the payment of amounts to vendors for the Assumed Liabilities;

(g) The Consulting Agreement, duly executed by the Buyer and Seller.

(h) Copies of all documents entered into with the Person providing the financing for the Buyer which is necessary for the Buyer to consummate the Acquisition.

(i) A certificate of good standing with respect to the Buyer issued by the Secretary of State of Delaware as of a date not more than five (5) days prior to the Closing Date.

(j) A copy of the resolutions of the Buyer’s Board of Directors, certified by the Secretary of the Buyer as having been duly and validly adopted and being in full force and affect, authorizing the execution and delivery of (i) this Agreement, and (ii) the other Transaction Documents to which the Buyer is a party and authorizing the performance by the Buyer of its obligations hereunder and thereunder, and certification from the Secretary of the Buyer as to whether any additional corporate approvals of any nature are necessary for the closing of any of the terms of the Acquisition.

Representations and Warranties Regarding Seller and the Assets.

Seller hereby represents and warrants to Buyer as follows, and Buyer, in agreeing to consummate the transactions contemplated by this Agreement, has relied upon such representations and warranties:

4.1 Incorporation; Authority. Seller (i) is a duly organized and validly existing limited liability company in good standing under the laws of the State of South Carolina and is duly qualified as a foreign limited liability company in any other jurisdiction in which they do business; and (ii) has all requisite power and authority to own, lease and operate its property and to carry on its business as presently conducted and to execute, deliver and perform its obligations under this Agreement and each other Transaction Document to which it is a party. A true and correct copy of the articles of organization of Seller, as amended to date, has been delivered to Buyer and is in full force and effect as of the Effective Date.

4.2 Execution; Validity of Agreement; Due Authorization. This Agreement and each Transaction Document to which Seller is a party has been duly executed and delivered by Seller, and this Agreement and each Transaction Document to which Seller is a party constitutes a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with their respective terms, except as enforceability may be limited by bankruptcy laws and general equitable principles. The execution and delivery of this Agreement by Seller and the performance by Seller of its obligations hereunder have been duly authorized by all necessary corporate action on the part of Seller.

4.3 Consents and Approvals; No Violations.

(a) Except as set forth on Schedule 4.3, none of the execution, delivery or performance of this Agreement or any Transaction Document by Seller, the consummation by Seller of the transactions contemplated hereby or thereby, or the compliance by Seller with any of the provisions hereof or thereof will (a) require (i) any filing with or notice to any Governmental Authority or other Person, (ii) the obtaining of any Permit or (iii) the expiration or termination of any statutory or regulatory waiting period, (b) conflict with or result in a violation or breach of, or default under, any provision of the articles of organization, limited liability company operating agreement or other organizational documents of Seller, (c) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration or require any payment) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which Seller is a party or by which Seller or any of Seller’s properties or assets is bound, (d) conflict with or violate any Applicable Laws or Governmental Orders applicable to Seller, or (e) result in the creation of any Encumbrances other than Permitted Encumbrances upon any of the Assets. No other Person has any preemptive rights, options or any other right to acquire the Assets or any portion of the Assets.

(b) Seller shall have received all Required Consents.

4.4 Investment Representations.

(a) Seller understands that the securities being provided as consideration hereunder are not being registered under the Securities Act or any state securities laws by reason of specific exemptions under the provisions thereof.

(b) Seller understands that (i) the Securities are “restricted securities” under applicable securities laws which provide, in substance, that such shares of stock may only be disposed of pursuant to an effective registration statement under the Securities Act and applicable state securities laws or an exemption from such registration, (ii) the Buyer has no obligation or intention to effect any registration of the shares of the Securities, (iii) the Buyer may endorse any certificates representing the Securities with a legend describing the restrictions referenced in clause (i) of this Section 4.4(b), and (iv) a stop-transfer order may be placed against transfer of such Securities as necessary to ensure compliance with the Seller Lock-up Agreement or with the applicable state and federal securities laws.

(c) Seller represents that, both at the time that it was offered the Securities and upon the execution of this Agreement, it is an accredited investor, as defined in Rule 501 of Regulation D promulgated under the Securities Act.

(d) Seller represents that it is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling them or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of the Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of the Securities in violation of the Securities Act or any applicable state securities law; provided, however, Seller does intend to distribute the Securities to the Members without value. Seller represents that it, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. Seller is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment. Seller represents that it has read and understands the Risk Factors set forth in Buyer’s latest Annual Report on Form 10-K for the fiscal year ended May 31, 2016. Seller acknowledges that it has had the opportunity to review all of Buyer’s reports as filed with the Securities and Exchange Commission and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of Buyer concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about Buyer and their respective financial conditions, results of operations, businesses, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that Buyer possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Seller acknowledges and agrees that neither the Buyer, nor any of its representatives, has provided Seller with any information or advice with respect to the Securities except as set forth herein, nor is such information or advice necessary or desired. None of the Buyer, nor any of its representatives, has made or makes any representation or warranty to the Buyer with respect to the Securities except as set forth herein. In connection with the issuance of the Securities to Seller, none of the Buyer nor any of its representatives has acted as a financial advisor or fiduciary to Seller. Seller is not acquiring the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

4.5 The Assets. Prior to giving effect to the transactions contemplated herein, except as set forth on the Schedules or disclosures related to the Acquisition:

(a) With respect to the owned Assets, except as set forth on Schedule 4.5(a), Seller is the exclusive, true and lawful owner of all right, title, and interest in and to the Assets and has good and valid title thereto.

(b) The Assets are all of the assets and properties used in connection with the conduct of the Business and are sufficient to operate the Business as presently operated. All such Assets (including leasehold interests) are free and clear of Encumbrances, except for Permitted Encumbrances.

(c) The Assets have not been the subject of any action and, there is no action pending, asserted or, to the Seller’s Knowledge, threatened by or against Seller concerning the ownership, use of, misappropriation, or licensed right to use, any of the Assets.

(d) All of the inventors, authors or creators of any of the Assets who are employees of, or independent contractors hired by, Seller have assigned their rights in the Assets to the Seller, except with respect to engineering plans and work product provided to Seller by a third party as an instrument of service for which Seller received only the right and license to use such plans for the specific project for which they were provided by such third party. No such inventor of any of the Assets is in default or breach of any term of any employment agreement, non-disclosure agreement, assignment of invention agreement or similar agreement relating to the protection, ownership, development, use or transfer of the Assets, and, to the extent that any Asset has been conceived, developed or created for Seller by any other Person, Seller has executed valid and enforceable written agreements with such Person with respect thereto transferring to Seller the entire right, title and interest therein and thereto by operation of law or by valid written assignment, except with respect to engineering plans and work product provided to Seller by a third party as an instrument of service for which Seller received only the right and license to use such plans for the specific project for which they were provided by such third party.

(e) There are no inventors of the Intellectual Property Assets other than the named inventors of the Intellectual Property Assets. There are no asserted or, to the Seller’s Knowledge, unasserted claims of ownership of the Assets by any Person other than the named owners of the Assets, and all such rights of Seller are being transferred to Buyer pursuant to this Agreement.

(f) All documents, agreements, prototypes, models, product samples, books, notebooks, certificates, licenses, files and any other diligence materials that Seller has provided to Buyer in connection with Buyer’s evaluation of the Assets are true, correct in all material respects and complete originals (if originals were provided by Seller) or copies of such materials.

(g) Seller owns or has the right to use all Software used in the Business, and Seller is hereby transferring all such rights as part of the Assets.

(h) Schedule 4.5(h) lists all registrations of Intellectual Property used in the Business. To the Seller’s Knowledge, all such registrations are in good standing and Seller owns all right, title and interest in and to the Intellectual Property assets used in the Business free and clear of Encumbrances other than Permitted Encumbrances. Any Encumbrances or assignments of Intellectual Property shall have been cleared prior to the Closing, and proof of such clearance shall be provided to Buyer. Except as set forth in Schedule 4.5(h), none of the Seller, the Assets or the Business as currently or formerly owned, licensed or used, have infringed, violated or misappropriated the Intellectual Property of any Person. To the Seller’s Knowledge, no person or entity has infringed, violated or misappropriated, or is infringing, violating or misappropriating, any Intellectual Property assets included in the Assets.

4.6 Litigation. Except as set forth on Schedule 4.6, there are no Actions, pending or to the Seller’s Knowledge threatened against or by Seller (a) relating to or affecting the Business, the Assets or the Assumed Liabilities; or (b) that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. To the Seller’s Knowledge, no event has occurred or circumstances exist that may give rise to, or serve as a basis for, any such Action. There is no judgment, Governmental Order, injunction, decree or award (whether rendered by a court, administrative agency or by arbitration) to which Seller is a party.

4.7 Employees.

(a) As of the date of this Agreement, Seller employs the Persons listed on Schedule 4.7(a) hereto in operating the Business. The (i) name; (ii) title or position (including whether full or part time); (iii) hire date; (iv) current annual base compensation rate (as of the last fiscal year); (v) commission, bonus or other incentive-based compensation (as of the last fiscal year); and (vi) a description of the fringe benefits provided (as of the last fiscal year), for each such Person, are listed on Schedule 4.7(a).

(b) Except as set forth in Schedule 4.7(b), as of the date hereof, all compensation, including wages, commissions and bonuses payable to all employees, independent contractors or consultants of the Business for services performed on or prior to the date hereof have been paid in full and there are no outstanding agreements, understandings or commitments of Seller with respect to any compensation, commissions or bonuses, other than amounts due in the Ordinary Course of Business.

(c) There are no written employment agreements with any Employees that are not terminable on the giving of reasonable notice in accordance with Applicable Law. To the Seller’s Knowledge, no Employee is in violation of any term of any employment contract, confidentiality or other proprietary information disclosure agreement or any other contract relating to the right of any such Person to be employed by, or otherwise perform services for, Seller.

(d) No Employee or former employee of the Seller or of any prior owner of the Assets has any right or claim to any of the Assets.

(e) Seller has never maintained any Employee Plan which has been subject to title IV of ERISA or Code Section 412 or ERISA Section 302. No assets or liabilities with respect to the Employees shall be transferred as a result of this Agreement from any Employee Plan to any plan maintained by the Buyer.

(f) Seller has received no notice that any person who could be classified as an employee under applicable law has not been so classified, and the Seller has made all applicable withholding tax payments with respect to each person and has maintained all applicable unemployment, disability, workers’ compensation and other required insurance policies with respect to such individuals.

(g) Seller is not, and has not been for the past three years, a party to, bound by, or negotiating any collective bargaining agreement or other contract with a union, works council or labor organization (collectively, “ Union ”), and there is not, and has not been for the past three years, any Union representing or purporting to represent any employee of Seller, and no Union or group of employees is seeking or has sought to organize employees for the purpose of collective bargaining. There has never been, nor has there been any threat of, any strike, slowdown, work stoppage, lockout, concerted refusal to work overtime or other similar labor disruption or dispute affecting Seller or any employees of the Business.

(h) Seller is and has been in compliance with all Applicable Laws pertaining to employment and employment practices to the extent they relate to employees of the Business, including all Laws relating to labor relations, equal employment opportunities, fair employment practices, employment discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits, immigration, wages, hours, overtime compensation, child labor, hiring, promotion and termination of employees, working conditions, meal and break periods, privacy, health and safety, workers’ compensation, leaves of absence and unemployment insurance. All individuals characterized and treated by Seller as consultants or independent contractors of the Business are properly treated as independent contractors under all applicable Laws. All employees of the Business classified as exempt under the Fair Labor Standards Act and state and local wage and hour laws are properly classified. There are no Actions against Seller pending, or to the Seller’s Knowledge, threatened to be brought or filed, by or with any Governmental Authority or arbitrator in connection with the employment of any current or former applicant, employee, consultant, volunteer, intern or independent contractor of the Business, including, without limitation, any claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay, wages and hours or any other employment related matter arising under Applicable Laws.

4.8 Contracts. The Transferred Contracts are the material contracts, agreements and commitments, whether written or oral, of Seller used in the Business, other than the Excluded Assets. Seller has previously delivered to Buyer a correct and complete copy of each such written Transferred Contract of Seller used in the Business (as amended to date) and a written summary setting forth the material terms and conditions of each oral agreement of Seller used in the Business. Each such agreement is legal, valid, binding, enforceable, and in full force and effect, except as enforceability may be limited by bankruptcy laws and general equitable principles. Seller is not in breach or default under such agreements, and, no event has occurred which with notice or lapse of time would constitute a breach or default by Seller of such agreements, or permit termination, modification, or acceleration, under such agreements. There is no agreement, order, or other instrument binding upon the Seller or the Business which restricts or prohibits the Business from competing with any other Person, from engaging in any business or from conducting activities in any geographic area, or which otherwise restricts or prohibits the conduct of the Business. There are no material disputes pending or, to the Seller’s Knowledge, threatened under any Transferred Contract.

4.9 Bankruptcy. Seller (i) has not committed nor does it currently intend to commit any act of bankruptcy, (ii) will not be insolvent upon the effectiveness of the Closing, (iii) has not proposed nor currently intends to propose a compromise or arrangement to its creditors generally, (iv) has not had nor currently intends to have any petition for a receiving order in bankruptcy filed against it, (v) has not made nor currently intends to make a voluntary assignment in bankruptcy, (vi) has not initiated nor intends to initiate any proceeding to have itself declared bankrupt or wound-up, (vii) has not initiated nor intends to initiate any proceeding to have a receiver appointed to any part of its assets, (viii) has not had any creditor take nor currently anticipates that any creditor will take possession of any of its property, and (ix) has not had any of the foregoing become enforceable nor currently anticipates that any of the foregoing will become enforceable upon any of its property or the Assets.

4.10 Compliance with Laws; Permits.

(a) The Seller has been and is in compliance with all Applicable Laws, Permits, judgments, decrees, and reporting requirements applicable to the Business and the Assets. Not in limitation of the foregoing, the Seller has filed all tax returns for any periods prior to the Closing that are required to be filed. Such tax returns are or will be true, complete and correct in all material respects. All Taxes due and owing by Seller (whether or not shown on any tax return) have been, or will be, timely paid. Seller has withheld and paid each tax required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, customer, owner or other party, and complied with all information reporting and backup withholding provisions of Applicable Law, and has otherwise complied with all employment laws, including maintaining all workers compensation insurance, unemployment insurance and disability insurance. Seller is not a “foreign person” as that term is used in Treasury Regulations Section 1.1445-2.

(b) The Seller has all Permits from Governmental Authorities required for the operation of the Business and the ownership of the Assets, each of which will be in full force and effect on the Closing Date. All such Permits are set forth on Schedule 4.10(b) attached hereto. No event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Permit set forth in Schedule 4.10(b). Except as set forth on Schedule 4.3, no registrations, filings, applications, notices, transfers, consents, approvals, orders, qualifications, waivers or other actions of any kind are required by virtue of the assignment to the Buyer of the Permits which are intended to be transferred to the Buyer as noted on Schedule 4.10(b).

4.11 Financial Statements and Other Information.

(a) The following financial statements of the Seller (the “ Financial Statements ”) have previously been delivered to Buyer: (i) reviewed statement of operations, statement of stockholders’ equity, statement of cash flows, and a balance sheet of the Seller as of and for the years ended December 31, 2014 and December 31, 2015, and (ii) unaudited statement of operations and balance sheet as of and for the twelve-month period ending December 31, 2016. Such financial statements have been prepared by Seller consistent with the historical practices of Seller. Such Financial Statements of the Seller fairly present in all material respects the financial position and results of operations and cash flows of the Seller as at the dates and for the periods presented therein.

(b) The Business has no liabilities, except the Assumed Liabilities and the Excluded Liabilities and (i) those liabilities reflected, disclosed or reserved against on the Financial Statements referenced in Section 4.11(a) above, (ii) liabilities resulting from the obligations set forth in this Agreement and the other Transaction Documents, and (iii) liabilities incurred in the Ordinary Course of Business since December 31, 2016 and which are not, in the aggregate, material in amount.

4.12 Absence of Certain Changes. Except as otherwise set forth on Schedule 4.12(a), since December 31, 2016, Seller has operated the Business in the Ordinary Course of Business and except as disclosed in the Schedules or in connection with the Acquisition, there has not been any:

(a) event, occurrence or development that has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(b) imposition of any Encumbrances upon any of the Assets, except for Permitted Encumbrances or Encumbrances to be satisfied at Closing;

(c) increase in the compensation of any Key Employees, except pursuant to the terms of written agreements or plans currently in effect, payment or agreement to pay or increase in or agreement to increase any pension, retirement allowance, severance or other employee benefit not already required or provided for under any existing plan, agreement or arrangement to any Key Employee, and except as required by Applicable Law, change in any respect to any such plan, agreement or arrangement;

(d) transfer, assignment, grant, sale or other disposition of (i) any of the Assets shown or reflected in the Financial Statements, except for the sale of inventory in the Ordinary Course of Business (including by way of any non-cash dividends, distributions on or in respect of, or redemptions of, any of Seller's capital stock) or (ii) any Intellectual Property related to the Business, except for abandonments of applications or registrations made in the Ordinary Course of Business;

(e) material damage, destruction or loss, or any material interruption in use, of any Assets, whether or not covered by insurance;

(f) cancellation of any debts or claims or amendment, termination or waiver of any rights constituting Assets;

(g) adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution involving the Seller or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against it under any similar Law involving the Seller;

(h) material change in cash management practices and policies, practices and procedures with respect to collection of accounts receivable, establishment of reserves for uncollectible accounts receivable, accrual of accounts receivable, inventory control, prepayment of expenses, payment of trade accounts payable, accrual of other expenses, deferral of revenue and acceptance of customer deposits involving the Seller;

(i) material change in any method of accounting or accounting practice for the Business, except as required by generally accepted accounting principles (“GAAP”) or as disclosed in the notes to the Financial Statements;

(j) entry by Seller into any Contract outside the Ordinary Course of Business;

(k) acceleration, termination, material modification to or cancellation of any Transferred Contract or License;

(l) declaration or payment of any dividends or distributions on or in respect of any of Seller’s capital stock or redemption, purchase or acquisition of Seller’s capital stock;

(m) incurrence, assumption or guarantee of any indebtedness for borrowed money in connection with the Business except unsecured current obligations and Liabilities incurred in the Ordinary Course of Business consistent with past practice; or

(n) any agreement to do any of the foregoing, or any action or omission that would result in any of the foregoing involving the Seller.

4.13 Taxes. Except as set forth on Schedule 4.13(a):

(a) Seller has, in respect of the Assets, timely filed or will timely file (taking into account available extensions of time to file), all Tax Returns required to be filed by it through the date hereof with the appropriate Governmental Authority. Each such Tax Return is true, complete and correct in all respects and completed in compliance with applicable legal requirements. Seller has timely paid and discharged all Taxes with respect to the Assets, whether or not shown as due and owing on such Tax Returns. Seller has withheld, collected and paid over to the appropriate taxing authority, or is properly holding for such payment, all Taxes required by Law to be withheld or collected.

(b) Neither the Seller nor any of its subsidiaries is or has been a party to or bound by (i) any Tax indemnity agreement, Tax sharing agreement, Tax allocation agreement or similar agreement, or (ii) any offer in compromise, closing agreement, gain recognition agreement or other agreement with any Governmental Authority with respect to Taxes. No Tax ruling has been applied for or received by the Company or any of its subsidiaries.

(c) (i) Neither the Seller nor any of its subsidiaries is or has been a party to or the subject of, and to Seller’s Knowledge there is no pending or threatened, claim, demand, cause of action, suit, arbitration, inquiry, hearing, investigation, request for information or filings, audit, examination, disputes, proposed adjustment or proceeding (whether administrative, regulatory or otherwise, or whether oral or in writing) with respect to Taxes relating to the Seller or its subsidiaries (“ Tax Claim ”), (ii) the Seller has no knowledge that any Tax Claim is being contemplated, and (iii) there are no matters under discussion by the Seller with any Governmental Authority with respect to the liability of the Seller or any of its subsidiaries with respect to Taxes. All deficiencies claimed, proposed or asserted or assessments made against the Seller or any of its subsidiaries as a result of any Tax Claim of which Seller has Knowledge have been fully paid, and no rationale underlying a Tax Claim has been asserted previously by any Governmental Authority that reasonably could be expected to be asserted in any other period.

(d) Seller has not waived any statute of limitations in respect of any Taxes or agreed to any extension of time with respect to a material tax assessment or deficiency.

(e) There is no Encumbrance for Taxes upon any of the Assets nor is any taxing authority in the process of imposing Encumbrances for Taxes on any of the Assets (other than for Permitted Encumbrances).

(f) Seller (i) is not, and has not been, a party to, or a promoter of, a “reportable transaction” within the meaning of Section 6707A(c)(1) of the Code and Treasury Regulations Section 1.6011-4(b)(1) (or any analogous provision of state, foreign or local Tax Law), and (ii) has not taken a reporting position on a Tax Return that, if not sustained, would be reasonably likely to give rise to a penalty for substantial understatement of federal income Tax under Section 6662 of the Code (or any similar provision of U.S. state, U.S. local or foreign Tax Law), without regard to any disclosure thereof.

(g) None of the Assets is tax-exempt use property within the meaning of Section 168(h) of the Code.

4.14 Books and Records. To the Seller’s Knowledge, all books and records of the Seller relating to the Business and the Assets, including, but not limited to, records and lists of past, present or prospective customers, suppliers, or personnel, marketing plans, sales literature and promotional literature and other books, ledgers, files, reports, operating records, and records relating to the Assumed Liabilities are accurate and have been maintained in a manner consistent with customary industry practices and in compliance with Applicable Law. All financial and accounting books, ledgers and accounts of the Seller relating to the Business, the Assets and the Assumed Liabilities have been accurately kept and completed in all material respects, and do not contain any material inaccuracies or discrepancies.

4.15 Data Room. To Seller’s Knowledge, all information and documentation contained in the electronic data room prepared by the Seller, to which Buyer has been provided access, is true and accurate and correctly reflects the subject matter to which it relates, as well as the Business.

4.16 Consents and Approvals. Except for the Consents listed on Schedule 4.16, no consents or notices to, or filings, registrations, or qualifications with any Person or Governmental Authority and no consents or waivers from, or notices to, any other party are required for the consummation by Seller of the transactions contemplated by this Agreement and the other Transaction Documents.

4.17 Broker’s Fee. Except for The Capital Corporation, no agent, broker, investment banker, firm, or other Person, acting on behalf of Seller or any of its Affiliates, or under the authority of Seller or any of its Affiliates, is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee or expense, directly or indirectly, in connection with any of the transactions contemplated by this Agreement or any of the other Transaction Documents.

4.18 Insurance . Schedule 4.18 sets forth (a) a true and complete list of all current policies or binders of fire, liability, product liability, umbrella liability, real and personal property, workers’ compensation, vehicular, fiduciary liability and other casualty and property insurance maintained by Seller or its Affiliates and relating to the Business, the Assets or the Assumed Liabilities (collectively, the “ Insurance Policies ”); and (b) with respect to the Business, the Assets or the Assumed Liabilities, a list of all pending claims and the claims history for Seller since December 31, 2014. There are no claims related to the Business, the Assets or the Assumed Liabilities pending under any such Insurance Policies as to which coverage has been questioned, denied or disputed or in respect of which there is an outstanding reservation of rights. Neither Seller nor any of its Affiliates has received any written notice of cancellation of, premium increase with respect to, or alteration of coverage under, any of such Insurance Policies.

4.19 Environmental Matters .

(a) The operations of Seller with respect to the Business are in compliance with all Environmental Laws. Seller has not received from any Person, with respect to the Business, any: (i) Environmental Claim; or (ii) written request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date.

(b) There has been no Release of Hazardous Materials in contravention of Environmental Law with respect to the Business which could reasonably be expected to result in an Environmental Claim against Seller, or a violation of Environmental Law by Seller.

(c) Seller has not retained or assumed, by contract or operation of Law, any liabilities or obligations of third parties under Environmental Law.

4.20 Disclosure. No representation or warranty by Seller in this Agreement or in any other schedule, exhibit, list, certificate or document delivered pursuant to this Agreement, contains or will contain at Closing any untrue statement of material fact or omits or will omit to state any material fact necessary to make any statement herein and therein not misleading.

Representations and Warranties of the Buyer.

The Buyer hereby represents and warrants to the Seller as follows, and the Seller, in agreeing to consummate the transactions contemplated by this Agreement, has relied upon such representations and warranties:

5.1 Organization, Good Standing and Qualification. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer has the power and authority to execute, deliver and perform its obligations under this Agreement and each other Transaction Document to which it is a party, to own and operate its properties and to carry on its business as currently conducted and as proposed to be conducted, and Buyer maintains all material licenses, certificates and permits from Governmental Authorities necessary for the conduct of its business.

5.2 Authorization. The execution and delivery of this Agreement and each other Transaction Document to which Buyer is a party, and the issuance of the Securities and other actions contemplated hereby, have been duly authorized by all requisite corporate action on the part of the Buyer. The Buyer has the power and authority to consummate the transactions on its part contemplated hereby, none of which will constitute any violation or breach of its Certificate of Incorporation and By-Laws.

5.3 Enforceability; No Violations. This Agreement and each other Transaction Document to which Buyer is a party constitutes the legal, valid and binding obligation of the Buyer, enforceable against Buyer in accordance with their respective terms, except as enforceability may be limited by bankruptcy laws and general equitable principles. Neither the execution and delivery of this Agreement nor the consummation of the transactions herein by the Buyer constitutes a violation or breach of Applicable Law or any provision of any contract or instrument to which the Buyer is a party or by which it is bound, or any order, writ, injunction, decree or judgment applicable to it, or constitute a default (or would but for the giving of notice or lapse of time or both, constitute a default) under any contract or instrument to which the Buyer is a party or by which it is bound.

5.4 No Conflicts. The execution, delivery and performance by the Buyer of this Agreement and each other Transaction Document to which Buyer is a party and the consummation by the Buyer of the transactions contemplated hereby and thereby will not (i) conflict with or result in a violation of any provision of the Buyer’s certificate of incorporation or by-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Buyer is a party, or (iii) result in a material violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which Buyer or its securities are subject) applicable to Buyer or by which any property or asset of Buyer is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Buyer is not in violation of its certificate of incorporation, by-laws or other organizational documents and is not in default (and no event has occurred which with notice or lapse of time or both could put Buyer in default) under, and Buyer has not taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which Buyer is a party or by which any property or assets of Buyer is bound or affected. All consents, authorizations, orders, filings and registrations which Buyer is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.

5.5 SEC Documents; Financial Statements. Buyer is subject to the reporting requirements of the 1934 Act. Buyer is current on its reporting obligations with the SEC pursuant to the Securities Exchange Act of 1934, as amended (the “1934 Act”). As of their respective dates, any reports filed within the last three fiscal years, as amended, complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to such documents, and none of such reports, as amended, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of Buyer included in Buyer’s documents filed with the SEC complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of Buyer as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

5.6 Absence of Litigation. There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of Buyer, threatened against or affecting Buyer, or its officers or directors in their capacity as such, that could have a Material Adverse Effect.

5.7 Internal Accounting Controls. Buyer maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

5.8 Foreign Corrupt Practices. Neither Buyer, nor any director, officer, agent, employee or other person acting on behalf of Buyer has, in the course of his actions for, or on behalf of, Buyer, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

5.9 No Investment Company. Buyer is not an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). Buyer is not controlled by an Investment Company.

5.10 No Disqualification Events. With respect to Securities to be offered and sold hereunder in reliance on Rule 506(b) under the Securities Act, none of Buyer, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of Buyer participating in the transaction hereunder, any beneficial owner of 20% or more of the Buyer’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with Buyer in any capacity at the time of sale (each, a “Covered Person” and, together, “Covered Persons”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). Buyer has exercised reasonable care to determine whether any Covered Person is subject to a Disqualification Event. Buyer has complied, to the extent applicable, with its disclosure obligations under Rule 506(e), and has furnished to Seller a copy of any disclosures provided thereunder.

5.11 Broker’s Fee. No agent, broker, investment banker, firm, or other Person, acting on behalf of Buyer or any of its Affiliates, or under the authority of Buyer or any of its Affiliates, is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee or expense, directly or indirectly, in connection with any of the transactions contemplated by this Agreement or any of the other Transaction Documents.

5.12 Disclosure. No representation or warranty by Buyer in this Agreement or in any other schedule, exhibit, list, certificate or document delivered pursuant to this Agreement, contains or will contain at Closing any untrue statement of material fact or omits or will omit to state any material fact necessary to make any statement herein and therein not misleading.

Transfer Restrictions and Voting Matters.

6.1 Seller covenants and agrees that during the Restricted Period (as hereinafter defined), it will use Reasonable Efforts to cause all of the Securities beneficially owned by it, not to be voted (i) against or withheld, as the case may be, from voting in respect of all those persons nominated and publicly recommended to serve as directors of Buyer by the Board of Directors or the management of Buyer (as the case may be), and (ii) with respect to any other action, proposal or matter to be voted on by the stockholders of Buyer (including through action by written consent), against the public recommendation of the Board of Directors. For greater certainty, the Seller may abstain from voting in any matter to be voted on by the stockholders of the Buyer. The restrictions set forth in this Section 6 shall expire on the day following the six-month anniversary of the Closing Date (the “ Restricted Period ”).

6.2 The Seller covenants to Buyer that no transfer of the Securities (including, but not limited to, distribution by the Seller of the Securities to the Member) shall be made during the Restricted Period unless exempt from the registration requirements under the Securities Act and in compliance with all other applicable securities Laws.

6.3 At Closing, Seller shall enter into the Seller Lock-Up Agreement attached hereto as Exhibit 6.3 , which shall be binding on any transferee of the Securities until the Seller Lock-Up Agreement is terminated.

Covenants .

7.1 Covenants of Buyer.

(a) Prior to Closing Date. Between the Effective Date and the Closing Date, Buyer hereby covenants and agrees that it will, except as otherwise approved in advance in writing by the Seller:

(i) Confidentiality. Buyer shall not publish nor disclose and shall not authorize or permit any of its officers, employees, directors, agents or representatives or any third party to publish or disclose any trade secrets or other confidential information or any data or business or financial books, records or other information of or pertaining to Seller or the Assets, which have been furnished to Buyer by Seller or to which Buyer has had access during any investigation made in connection with this Agreement and which is not otherwise available to Buyer on a non-confidential basis, except as required by Law and by or in connection with any public or private equity or debt transaction.

(ii) Advise of Changes. Buyer shall promptly advise Seller in writing of any fact that, if known at the Effective Date, would have been required to be set forth or disclosed pursuant to this Agreement, or which would result in the breach in any material respect by Buyer of any of its representations, warranties, covenants or agreements hereunder.

(iii) Publicity. Except as required by Law, Buyer shall not publicize, advertise or announce to any third party the entering into of this Agreement, the terms of this Agreement or the transactions contemplated hereby.

(iv) Investigation. Buyer shall use reasonable efforts to conduct its investigation of the Assets in such a manner as to prevent disruption of the relations with the employees, customers, suppliers and licensors of Seller.

(v) Restricted Communications. Buyer shall not have any communications with Sellers’s customers, clients, employees, or vendors, whether written or verbal, before the Closing without the Seller’s written permission.

(b) After Closing Date.

(i) Anti-Dilution. If and whenever during the 120 days after the Closing Date, the Buyer issues or sells any shares of Common Stock (excluding shares of Common Stock deemed to have been issued or sold by the Buyer in connection with any Excluded Securities) for a consideration per share (the “ New Issuance Price ”) less than the per share Common Stock Purchase Price, then the Buyer shall issue to the Seller such number of shares of Common Stock equal to the difference between (i) the quotient of the aggregate of the Common Stock Purchase Price divided by the New Issuance Price, rounded up to the next whole share, and (ii) the Buyer Stock Consideration.

(ii) Conversion of Buyer Preferred Stock Note. Promptly following the Closing Date, Buyer shall initiate the actions required for the automatic conversion of the Buyer Preferred Stock Note into the Buyer Preferred Stock. Buyer estimates that all required actions can be completed within sixty days following the Closing Date, and Buyer covenants to work diligently to accomplish all such actions in order to complete the conversion of the Buyer Preferred Stock Note into the Buyer Preferred Stock within such period of time.

7.2 Covenants of Seller. Between the Effective Date and the Closing Date, Seller hereby covenants and agrees that it will, in connection with the Business and the Assets, except as otherwise approved in advance in writing by the Buyer:

(a) Conduct of Business. Except for (i) reductions in the number of employees (provided, however, that Seller may not terminate any Key Employees except for those Key Employees that are terminated by the Seller for cause or who leave voluntarily), (ii) as expressly and specifically contemplated by this Agreement, or (iii) as otherwise consented to in writing by the Buyer (which written consent may not be unreasonably withheld, conditioned or delayed), from the date hereof through the Closing, the Seller shall use Reasonable Efforts to conduct the Business in all material respects in the Ordinary Course of Business, in substantially the same manner as heretofore conducted and use its Reasonable Efforts to preserve intact the Assets and the Business and Seller’s relationship with its customers, suppliers, creditors and employees. Without limiting the foregoing, during the period from the date hereof through the Closing, Seller shall, and shall cause its subsidiaries to, with respect to the Assets, the Assumed Liabilities or the Business:

(i) preserve and maintain all Licenses required for the conduct of the Business as currently conducted or the ownership and use of the Assets;

(ii) pay the debts, Taxes and other obligations of the Business when due;

(iii) continue to collect accounts receivable in a manner consistent with past practice, without accelerating or discounting such accounts receivable;

(iv) maintain the properties and assets included in the Assets in the same condition as they were on the date of this Agreement, subject to reasonable wear and tear;

(v) continue in full force and effect without modification all insurance policies, except as required by applicable Law;

(vi) defend and protect the properties and assets included in the Assets from infringement or usurpation;

(vii) perform all of its obligations under all Transferred Contracts;

(viii) maintain the books and records of the Business in accordance with past practice;

(ix) comply in all material respects with all Laws applicable to the conduct of the Business or the ownership and use of the Assets; and

(x) not take and not permit any action that would cause any of the changes, events or conditions described in Section 4.12 to occur.

(b) Access. The Buyer and its authorized representatives, at its sole expense, shall have reasonable access during normal business hours upon prior arrangement with the Seller to all properties, books, records, contracts and documents of the Seller in connection with the Assets and Assumed Liabilities; and the Seller shall furnish or cause to be furnished to the Buyer and its authorized representatives all reasonable information with respect to the Assets and Assumed Liabilities as the Buyer may reasonably request. In the event of the termination of this Agreement, all such information shall remain confidential and shall not be used by the Buyer, its officers, directors, employees, partners, members or agents, and all copies thereof shall be returned to the Seller. No investigation by Buyer or other information received by Buyer shall operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Seller in this Agreement.

(c) Contracts and Commitments. The Seller shall not enter into any contract, commitment or transaction outside of the Ordinary Course of Business which is to be in the Business without the prior written consent of the Buyer.

(d) Sale of Assets. The Seller will not sell or dispose of, or agree to sell or dispose of, any of the Assets outside of the Ordinary Course of Business without the prior written consent of the Buyer.

(e) Liabilities. The Seller will not, and will not agree to, create any indebtedness or any other fixed or contingent liability in connection with the Assets, including, without limitation, liability as a guarantor or otherwise with respect to the obligations of others.

(f) Insurance. All present insurance insuring the Assets, wherever located, will be maintained by the Seller in all respects.

(g) No Default. The Seller shall not do any act or omit to do any act, or permit any act or omission to act, which will cause a material breach of any material contract, commitment or obligation by which it is bound in connection with the Assets.

(h) Authorization from Others. Except as set forth on the Schedules hereto or in connection with the Acquisition, prior to the Closing Date the Seller shall have obtained all Required Consents.

(i) Confidentiality. From and after the Closing, Seller shall, and shall cause its Affiliates to, hold, and shall use its reasonable best efforts to cause its or their respective Representatives to hold, in confidence any and all information, whether written or oral, concerning the Business, except to the extent that Seller can show that such information (a) is generally available to and known by the public through no fault of Seller, any of its Affiliates or their respective Representatives; or (b) is lawfully acquired by Seller, any of its Affiliates or their respective representatives from and after the Closing from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If Seller or any of its Affiliates or their respective Representatives are compelled to disclose any information by judicial or administrative process or by other requirements of Law, Seller shall promptly notify Buyer in writing and shall disclose only that portion of such information which Seller is advised by its counsel in writing is legally required to be disclosed, provided that Seller shall use reasonable best efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information. To the extent that Buyer delivers any material, non-public information to Seller, Seller hereby covenants and agrees that Seller shall have a duty of confidentiality with respect to, and a duty not to trade on the basis of, such material, non-public information.

(j) Advise of Changes. Seller shall promptly advise Buyer in writing of any fact that, if known at the Effective Date, would have been required to be set forth or disclosed pursuant to this Agreement, or which would result in the breach in any material respect by Seller of any of its representations, warranties, covenants or agreements hereunder.

Conditions Precedent to the Buyer’s Obligations at Closing.

All obligations of the Buyer under this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions unless otherwise waived in writing or electronic communication by the Buyer:

8.1 Representations and Warranties. The Seller’s representations and warranties contained in this Agreement or in any list, certificate or document delivered pursuant to the provisions hereof shall be true at and as of the time of Closing except (a) to the extent such representations and warranties expressly relate to an earlier date in which case such representations and warranties shall be true and complete on and as of such date; and (b) where the failure of the representations and warranties to be true and correct on the Closing Date does not have a Material Adverse Effect.

8.2 Performance of Agreements. The Seller shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing.

8.3 Consent to Transfer of the Transferred Contracts. Except as set forth on Schedule 8.3, Seller shall have delivered to Buyer executed copies of the Required Consents in form and substance reasonably acceptable to Buyer.

8.4 Adverse Change. There shall not have been a Material Adverse Effect to the Business or the Assets, whether covered by insurance or not.

8.5 Closing Deliveries. The Seller shall have delivered the documents and other items described in this Agreement. Seller shall also deliver possession of the Business and the Assets at Closing.

8.6 No Litigation. There shall not be any pending or, to Seller’s Knowledge, threatened Actions by or before any court, arbitrator, governmental body or agency which shall seek to restrain, prohibit or invalidate the transactions contemplated hereby or which, if adversely determined, would result in a breach of a representation, warranty or covenant of either party herein.

Conditions Precedent to the Seller’s Obligations at Closing.

All obligations of the Seller under this Agreement are subject to the fulfillment, prior to or at the Closing, of each of the following conditions unless otherwise waived in writing or electronic communication by the Seller:

9.1 Representations and Warranties. The Buyer’s representations and warranties contained in this Agreement or in any list, certificate or document delivered pursuant to the provisions hereof shall be true at and as of the time of Closing.

9.2 Performance of Agreements. The Buyer shall have performed and complied with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing.

9.3 Adverse Change. There shall not have been a Material Adverse Effect to the Business, operations, securities or assets of Buyer, whether covered by insurance or not.

9.4 Closing Deliveries. The Buyer shall have delivered to the Seller the Purchase Price as described in Section 2 of this Agreement; and the Seller shall have received all the items to be delivered from Buyer under Section 3.3 of this Agreement.

9.5 No Litigation. There shall not be any pending or threatened Actions by or before any court, arbitrator, governmental body or agency which shall seek to restrain, prohibit or invalidate the transactions contemplated hereby or which, if adversely determined, would result in a breach of a representation, warranty or covenant of either party herein.

10.

Survival and Indemnification.

10.1 Survival of Representations and Warranties. Subject to the limitations and provisions of this Agreement, the representations and warranties contained in Section 4, Section 5, and Section 6 of this Agreement shall survive the Closing and remain in full force and effect until the date that is eighteen (18) months from the Closing Date, except (i) as to any matter as to which a good faith claim has been submitted in writing to the other party describing the claim in reasonable detail before such date and identified as a claim for indemnification pursuant to this Section 10, (ii) as to any matter which is based successfully upon fraud or willful misrepresentation with respect to which the cause of action shall expire only upon expiration of the applicable statute of limitations, and (iii) as to any matter which is successfully based on a misrepresentation under Section 4.1, Section 4.2, Section 4.4, Section 4.5(a), Section 4.17, Section 5.1, Section 5.2, Section 5.3, Section 5.5 and Section 5.11 with respect to which the cause of action shall survive indefinitely.

10.2 Indemnification by the Seller. Subject to the other terms and conditions of this Section 10, Seller shall at its own cost and expense indemnify, hold harmless and, to the extent requested by the Buyer, defend the Buyer Indemnitees against, and reimburse such Buyer Indemnitees for, any and all losses of such Buyer Indemnitee arising out of, or to the extent relating to or in connection with:

(a) any inaccuracy in or breach of any of the representations or warranties of Seller contained in this Agreement, or in any certificate, ancillary agreement or instrument delivered by or on behalf of Seller pursuant to this Agreement, as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date);

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Seller pursuant to this Agreement, any other Transaction Document or any certificate, ancillary agreement or instrument delivered by or on behalf of Seller pursuant to this Agreement;

(d) any claim relating to the Seller’s or its Affiliates’ failure to pay any withholding Taxes to the Internal Revenue Service or to any state Tax authority, or any failure of Seller to pay any unemployment benefits or Taxes, other than as a result of the Buyer’s failure; or

(e) any third party claim based upon, resulting from or arising out of the Business, operations, properties, assets or obligations of Seller (other than the Assumed Liabilities) conducted, existing or arising prior to the Closing Date.

The matters set forth in Sections 10.2(c), (d) and (e) above shall be referred to as the “Specific Indemnity Matters.”

10.3 Indemnification by the Buyer. Subject to the other terms and conditions of this Section 10, the Buyer shall, at its own cost and expense indemnify, hold harmless and, to the extent requested by the Seller, defend the Seller Indemnitees against, and reimburse such Seller Indemnitees for, any and all losses of such Seller Indemnitee arising out of, or to the extent relating to or in connection with:

(a) any inaccuracy in or breach of any of the representations or warranties of the Buyer contained in this Agreement, or in any certificate, ancillary agreement or instrument delivered by or on behalf of the Buyer pursuant to this Agreement, as of the date such representation or warranty was made or as if such representation or warranty was made on and as of the Closing Date (except for representations and warranties that expressly relate to a specified date, the inaccuracy in or breach of which will be determined with reference to such specified date);

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by the Buyer pursuant to this Agreement, any other Transaction Document or any certificate, ancillary agreement or instrument delivered by or on behalf of the Buyer pursuant to this Agreement;

(d) any Liability based upon, resulting from or arising out of the Business or the ownership of the Assets by the Buyer on or following the Closing Date.

10.4 Indemnification Procedures.

(a) Promptly upon receipt of a Claim, an Indemnified Party will notify the Indemnifying Parties in writing of the circumstances of the Claim and will keep the Indemnifying Parties apprised of any material changes in the circumstances of the Claim. The delay or failure to give such written notice will not relieve any Indemnifying Party of any Liability to the Indemnified Parties except to the extent that the failure to provide notice results in the failure of actual notice and such Indemnifying Party is materially damaged as a result of such failure.

(b) The Indemnifying Parties will be entitled to participate in, and to assume fully, the defense of any third party Claim with counsel approved by the Indemnified Parties. The Indemnified Parties will give the Indemnifying Parties reasonable information and assistance, at the Indemnifying Parties’ expense, in connection with the defense of such Claim. If timely notice of a Claim is given to the Indemnifying Parties and the Indemnifying Parties do not give notice to the Indemnified Parties within fifteen (15) days after receipt of such written notice of the Indemnifying Parties’ intent to assume the defense, the Indemnifying Parties will be bound by any determination made in such proceeding or any compromise or settlement thereof effected by the Indemnified Parties.

(c) The Indemnified Parties will have the right to employ a single counsel and to participate in the defense of such Claim, but the fees and expenses of such counsel will be at the expense of the Indemnified Parties unless: (i) the employment of counsel by the Indemnified Parties has been authorized by the Indemnifying Parties; or (ii) the Indemnifying Parties have not in fact employed counsel to assume the defense of the Claim within a reasonable time following receipt of the written notice given pursuant to this Section 10.4, or (iii) there exists, in the Indemnified Parties’ good faith judgment, based on the advice of outside legal counsel, a conflict of interest which, under applicable principles of legal ethics, could reasonably be expected to prohibit a single legal counsel from representing both the Indemnified Parties and the Indemnifying Parties in such proceeding.

(d) Subject to the terms of Section 10.4(c), after notice to the Indemnified Parties of the assumption of defense by the Indemnifying Parties, the Indemnifying Parties will have no Liability to the Indemnified Parties for any fees or costs subsequently incurred by Indemnified Parties in such defense (except for fees and costs incurred in responding to requests for assistance from the Indemnifying Parties). No compromise or settlement of a claim binding on the Indemnified Parties will be effected by the Indemnifying Parties without the consent of the Indemnified Parties, which consent will not be unreasonably withheld.

10.5 Limitations. Notwithstanding anything to the contrary contained in this Agreement, Seller shall not be liable for indemnification under this Agreement (except in the case of the Specific Indemnity Matters) unless and until the aggregate amount of all such losses incurred by Buyer Indemnitees exceeds $100,000, at which point Seller shall be liable for indemnification under this Agreement for all amounts in excess of the $100,000 threshold. Each Indemnified Party waives, on behalf of itself and its affiliates, any right to multiply actual damages or recover consequential, indirect, special, punitive or exemplary damages (including, without limitation, damages for lost profits or loss of business opportunity) arising in connection with or with respect to the indemnification provisions hereof. Each Indemnified Party entitled to indemnification hereunder shall take reasonable steps to mitigate losses after becoming aware of any event which could reasonably be expected to give rise to any losses that are indemnifiable or recoverable hereunder. Seller shall not be liable for damages in excess of the Indemnification Cap (as defined below). The “ Indemnification Cap ” shall mean $2,000,000. The Indemnification Cap shall not be applicable to a breach of the representations or warranties set forth in Section 4.1, Section 4.2, Section 4.4, Section 4.5(a), Section 4.16, nor to the Specific Indemnity Matters; provided, however, that the indemnification obligations of the Seller with respect to any such provisions shall not exceed an amount equal to the Cash Consideration plus 50% of the Buyer Stock Consideration.

10.6 Exclusive Remedies. The parties acknowledge and agree that their sole and exclusive remedy with respect to losses and any and all claims (other than claims arising from fraud on the part of a party hereto in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this Section 10. Nothing in this Section 10.6 shall limit any Indemnified Party’s right to seek and obtain any equitable relief to which any Indemnified Party shall be entitled or to seek remedy for losses on account of any party's fraudulent, criminal or willful misconduct, provided the other party is not also in breach of this Agreement or any other agreement or understanding contemplated herein or related to the Acquisition.

10.7 Set-Off. Upon the resolution of any Claim resulting in the obligation of the Seller to pay any amount to Buyer, the amount due to Buyer for such Claim shall (i) be offset against any interest and other amounts then due to Seller under the Buyer Preferred Stock Note, and after all such amounts then due Seller are exhausted or in the event the Buyer Preferred Stock Note has already been converted to Buyer Preferred Stock, then (ii) be offset against any outstanding principal balance of the Buyer Preferred Stock Note, and after the Buyer Preferred Stock Note is satisfied in full or in the event the Buyer Preferred Stock Note has already been converted to Buyer Preferred Stock, then (iii) be offset against any amount then due to Seller as payment due for the Buyer Preferred Stock, and after all such amounts then due Seller are exhausted, then (iv) be used to redeem shares of the Buyer Preferred Stock then held by Seller or its owners, at a rate equal to the greater of the Preferred Stock Purchase Price or the fair market value of such shares assuming conversion to the Buyer’s Common Stock at the designated rate, and in the event all such Buyer Preferred Stock is redeemed, then (v) be offset against any interest and other amounts then due to Seller under the Buyer Note, and after all such amounts then due Seller are exhausted, then (vi) be offset against any outstanding principal balance of the Buyer Note, and after the Buyer Note is satisfied in full, then (vii) Seller shall satisfy such remaining amount in cash.

11.

Exclusivity; Termination .

11.1 Exclusivity. Seller agrees that, beginning on the Effective Date and continuing through the earlier of the Closing Date or May 1, 2017, unless terminated earlier in accordance with the provisions of this Section 11, Buyer shall have a period of exclusivity. During such period, Seller will not, and will cause its respective directors, officers, employees, representatives, agents and affiliates not to, directly or indirectly, solicit or initiate or enter into discussions or transactions with, or provide any information to, any person, corporation, partnership or other entity or group (other than Buyer and its designees) concerning the sale of the Assets.

11.2 Termination by Seller. This Agreement may be terminated by Seller if Seller is not in material breach thereof, upon written notice to Buyer, upon the occurrence of any of the following:

(a) In the event Closing does not occur on or before May 1, 2017.

(b) If, on the date that would otherwise be the Closing Date, Seller shall have notified Buyer in writing that one or more of the conditions precedent to the obligations of Seller set forth in Section 9 of this Agreement have not been satisfied or waived in writing by Seller and such failure to satisfy such condition precedent remains unsatisfied for a period of thirty (30) days after the date that would have been the Closing Date.

(c) If, on the date that would otherwise be the Closing Date, there is in effect any judgment, decree, or order that would prevent or make unlawful the Closing.

(d) If Buyer has failed to cure any material breach of any of its representations, warranties, covenants or obligations under this Agreement within ten (10) days after Buyer received written notice of such breach from Seller (except in the case of Buyer’s failure to pay the Purchase Price on the Closing Date, for which case there shall be no cure period).

11.3 Termination by Buyer. This Agreement may be terminated by Buyer, if Buyer is not in material breach, upon written notice to Seller, upon the occurrence of any of the following:

(a) If, on the date that would otherwise be the Closing Date, Buyer shall have notified Seller in writing that one or more of the conditions precedent to the obligations of Buyer set forth in Section 8 of this Agreement have not been satisfied or waived in writing by Buyer and such failure to satisfy such condition precedent remains unsatisfied for a period of thirty (30) days after the date that would have been the Closing Date.

(b) If, on the date that would otherwise be the Closing Date, there is in effect any judgment, decree or order that would prevent or make unlawful the Closing.

(c) If Seller has failed to cure any material breach of any of its representations, warranties or covenants under this Agreement within ten (10) days after Seller has received written notice of such breach from Buyer.

12.

Obligations After the Closing Date.

12.1 Non-Competition; Non-Solicitation.

(a) The Seller does hereby covenant and agree to and with the Buyer that it will not, either directly or indirectly, in any capacity whatsoever, whether as a principal, agent, owner, partner, consultant, shareholder or otherwise, own, operate, or be engaged in the operation of, or have any financial or other interest or otherwise be commercially involved in, any business operation, whether a proprietorship, partnership, joint venture or a private or public company, or otherwise carry on or engage in, a solar energy engineering, procurement and construction business (the “ Competitive Business ”) for the period commencing on the Closing Date and continuing for a period of three (3) years following the Closing Date (the “ Non-Compete Period ”); provided, however, that nothing in the foregoing covenant shall be read or construed as a prohibition against the Seller or its Affiliates from (i) owning the Securities and being involved in the Buyer, (ii) purchasing or obtaining options to purchase stocks, shares, bonds, debentures or term notes or other securities convertible into voting shares of any public company provided that the number of voting shares or securities convertible into voting shares of a public company which carries on a business which is the same or substantially similar to the Competitive Business shall not exceed two percent (2%) of the total number of issued and outstanding voting shares of the said public company, (iii) taking any and all actions necessary to complete and close-out the Excluded Projects, or (iv) continuing to own and operate Brandywick, LLC and its business as historically conducted. For the absence of doubt, the restrictions in this Section 12, shall not extend to any officer, director, employee, owner, noteholder, or agent of Seller, other than those (i) who shall continue under an employment agreement to be officers, directors or employees of the Buyer after the Closing Date, or (ii) who sign a separate letter agreement in connection with the closing. However, the terms of any employment agreement or separate letter agreement shall govern so that this provision shall not be applicable in such case.

(b) The Seller does hereby further covenant and agree that it will not during the Non-Compete Period for the purpose of soliciting any business that is or will be a Competitive Business:

(i) call upon, canvass, take away or solicit, or attempt to call upon, canvass, take away or solicit, any customer with whom the Business has had an agreement or Contract, or with whom the Business or the Buyer is in negotiations for the purpose of offering any services or products relating to the Buyer’s business;

(ii) disclose or attempt to disclose to any Person, the name or address of or any information relating to any past or present customer or supplier of the Business or the Buyer; or

(iii) advise or attempt to advise any of the customers or suppliers of the Business or the Buyer or potential customers with whom the Business or the Buyer is in negotiations, to withdraw, curtail or cancel business with the Business or the Buyer.

Notwithstanding the above, subject to the terms of this Agreement, nothing in the foregoing covenant shall be read or construed as a prohibition against the Seller or its Affiliates from (i) taking any and all actions necessary to complete and close-out the Excluded Projects, or (ii) continuing to own and operate Brandywick, LLC and its business as historically conducted.

(c) The Seller does hereby further covenant and agree that it will not, during the Non-Compete Period, directly or indirectly, solicit for employment, hire or initiate contact directly or indirectly with any employee, independent contractor, officer, director, or executive of the Buyer (including any Employee of Seller who is hired by Buyer at the Closing) for the purpose of offering him or her employment, either directly or indirectly, with any Person other than the Buyer; provided, however that Seller is not prohibited from (i) any advertisement or general solicitation that is not targeted at any specific employee, independent contractor, officer, director, or executive of the Buyer, (ii) employment of any person who the Seller can demonstrate contacted the Seller of his or her own initiative without any direct or indirect solicitation (other than general solicitations described in the foregoing clause (i)) by or encouragement from the Seller or (iii) the solicitation or employment of persons who have not been employed by the Buyer for a period of one year.

(d) Seller acknowledges and agrees that the restrictions contained in this Section 12.1 are reasonable and necessary to protect the legitimate interests of Buyer and constitute a material inducement to Buyer to enter into this Agreement and consummate the transactions contemplated by this Agreement and the Transaction Documents. Without limiting the generality of Section 16.6, the Seller acknowledges and agrees that in the event that any covenant contained in this Section 12.1 should ever be adjudicated to exceed the time, geographic, product or service, or other limitations permitted by applicable Law in any jurisdiction, then any court or arbitrator or competent authority is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service, or other limitations permitted by applicable Law, in keeping with the intention of the Parties to give effect to the provisions of this Section 12.1 to the maximum extent permitted by Law.

(e) Without limiting the generality of Section 12.1, the Seller acknowledges and agrees that a breach or threatened breach of this Section 12.1 would give rise to irreparable harm to Buyer and the Business, for which monetary damages would not be an adequate remedy, and hereby agrees that in the event of a breach or a threatened breach by such Seller of any such obligations, Buyer shall, in addition to any and all other rights and remedies that may be available in respect of such breach, be entitled to equitable relief, including a temporary restraining order, an injunction, specific performance and any other relief that may be available from a court of competent jurisdiction without any requirement to post bond.

12.2 Further Assurances. At the reasonable request of either party from time to time, the Seller and Buyer will execute and deliver such further reasonable instruments and will take such other reasonable action more effectively to consummate the transactions contemplated by this Agreement and to put the Buyer into ownership, possession and control of all the Assets to the exclusion of all others whose claims may have arisen prior to the Closing Date.

13.

Employment and Employee Benefit Arrangements.

13.1 Employment. Buyer agrees that effective as of the Closing Date it will extend an offer to immediately hire and employee all of Seller’s employees, with all such employees receiving base compensation from Buyer at least equal to the base compensation that they are receiving from Seller immediately prior to the Closing Date.

13.2 Benefits. The Seller will remain and shall be solely responsible for all payments and obligation to all Seller’s employees in the Business while they are employed by the Seller, and the Seller shall comply with all applicable legal requirements in connection therewith. From and after the Closing Date, Buyer will have no responsibility, duty or liability with respect to any employee benefit plans of the Seller that are in effect on the date hereof.

14.

Fees and Expenses .

14.1 Representation and Indemnity with Respect to Brokers. Each party hereby represents and warrants to the other that it has not engaged or dealt with any broker or other person who may be entitled to any brokerage fee or commission in respect of the execution of this Agreement or the consummation of the transactions contemplated hereby, except for the Seller’s retention of The Capital Corporation. Without limiting the generality of the foregoing, each of the parties hereto shall indemnify and hold the other harmless against any and all claim, loss, liability or expense which may be asserted against such other party as a result of such first mentioned party’s dealings, arrangements or agreements with any such broker or person.

14.2 Expenses of the Transaction. Each party hereto shall pay its own expenses incidental to the preparation of this Agreement and the consummation of the transactions contemplated hereby; provided, however, at the Closing Buyer shall pay to Seller the fees and expenses of Seller’s counsel in connection with the Acquisition in an amount not to exceed seventy-five thousand dollars ($75,000).

14.3 Sales, Transfer and Documentary Stamps. The Seller and the Buyer shall share equally all sales, transfer and documentary taxes or stamps, if any, due as a result of the transfers of the Assets to the Buyer hereunder.

15. Notices . All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient or (d) on the fourth business day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 15):

(a) if to Seller:

SolBright Renewable Energy, LLC

701 East Bay Street, Suite 302

Charleston, SC 29403

E-mail: phassell@solbrightre.com

Attention: Patrick Hassell

(b) if to Buyer:

211 Warren Street, Suite 320

Newark, NJ 07103

E-mail: tmdefranco@arkadosgroup.com

Attention: CEO

with copies (which shall not constitute notice) to:

Nelson Mullins Riley & Scarborough LLP

1320 Main Street, 17 ^th Floor

Columbia, SC 29201

E-mail: dan.fritze@nelsonmullins.com

Attention: Daniel J. Fritze, Esq.

with copies (which shall not constitute notice) to:

LKP Global Law, LLP

1901 Avenue of the Stars, Suite 480

Los Angeles, CA 90067

E-mail: mcrone@lkpgl.com

Attention: Mark Crone, Esq.

16.

Miscellaneous .

16.1 Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York for agreements to be wholly performed therein, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.

16.2 Assignment. This Agreement shall not be assignable by either party without the prior written approval of the other party. To the extent assignable, this Agreement shall be binding upon, and inure to the benefit of, the Buyer and its successors and assigns and the Seller and its successors and assigns.

16.3 Headings for Reference Only. The section and paragraph headings in this Agreement are for convenience of reference only and shall not be deemed to modify or limit the provisions of this Agreement.

16.4 No Publicity. No press releases or public disclosures, either written or oral, of the transactions contemplated by or concluded under this Agreement, shall be made without the prior knowledge and written consent of the Buyer and Seller, except as may be required by Law.

16.5 Entire Agreement and Amendment; Waiver. This document contains the entire agreement between the parties hereto with respect to the transactions contemplated hereby and supersedes all prior or contemporaneous agreements, understandings, representations and warranties between the parties, and may not be amended except by written instrument executed by the duly authorized officers of the parties hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

16.6 Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the parties hereto agree that the court making the determination of invalidity or unenforceability shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified.

16.7 Further Assurances. From and after the date of this Agreement, upon the request of Buyer or Seller, the Seller and Buyer, as applicable, shall execute and deliver such instruments, documents or other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. If at any time it is necessary that a party be furnished with additional information, documents or records in order properly to prepare or support its tax returns or other documents or reports required to be filed with governmental entities or otherwise for any purpose in connection with the performance or discharge by the parties of their obligations hereunder, and such information, documents or records are in the possession or control of the other party, such other party agrees to use all reasonable efforts to timely furnish or make available such information, documents or records (or copies thereof) to the requesting party at the requesting party’s sole cost and expense.

16.8 Specific Performance . The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.

16.9 Execution in Counterparts; PDF Signatures. This Agreement may be executed in .pdf format, which shall be deemed an original, and Seller and Buyer may become a party hereto by executing a counterpart of this Agreement. The parties hereto further agree that transmission to the other party of this Agreement with its portable document format (.pdf) signatures shall bind the party transmitting this Agreement by (.pdf) in the same manner as if such party’s original signature had been delivered.

16.10 Interpretation . For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Schedules and Exhibits mean the Articles and Sections of, and Schedules and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a Law means such Law as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

16.11 Representation by Counsel. Each of the parties acknowledged that they have been represented by legal counsel in the negotiation and execution of this Agreement.

*** SIGNATURES APPEAR ON FOLLOWING PAGE ***

IN WITNESS WHEREOF , the parties have caused this Asset Purchase Agreement to be executed and delivered effective as of the day and year first above written.

ARKADOS GROUP, INC.

By:	/s/ Terrence DeFranco
Name:	Terrence DeFranco
Title:	Chief Executive Officer

SOLBRIGHT RENEWABLE ENERGY, LLC

By:	/s/ Patrick Hassell
Name:	Patrick Hassell
Title:	Managing Director

[Signature Page to Asset Purchase Agreement]

Schedule 1.1

Definitions

The “ Acquired Records ” shall mean all (a) lists, records and other information of the Seller pertaining to suppliers and customers of the Business, (b) lists, records and other information of the Seller pertaining to accounts, personnel and referral sources related to the Business, (c) all drawings, plats, specifications, reports, studies, plans, books, ledgers, files, documents, manuals, correspondence, business and accounting records of every kind (including all financial, business and marketing plans) and other materials of, or maintained for, the Business, (d) advertising, marketing and promotional materials related to the Business, and (e) all other printed or written materials, in each case owned by the Seller, in any form or medium, related to the Business.

“ Acquisition ” shall mean the transaction referred to in the Agreement.

“ Action ” shall mean any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.

“ Affiliate ” shall mean, with respect to any Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such Person. For the purposes of this definition, a Person shall be deemed to control another Person if such Person owns or has dispositive power over, directly or indirectly, more than twenty five percent (25%) of the voting equity interests of the other Person; provided, however, following the Closing the Seller shall not be considered an Affiliate of Buyer for any reason under this Agreement.

“ Agreement ” shall mean the Asset Purchase Agreement between Buyer and Seller dated as of the Effective Date.

“ Applicable Law ” shall mean, with respect to any Person, any federal, state, local, municipal, foreign or other Law, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by any Governmental Authority that applies to such Person, its business and its properties.

“ Assets ” shall mean those assets being acquired by Buyer pursuant to the terms of the Agreement as set forth in Section 1.1 of the Agreement and Schedules 1.1(a)-1.1(i) thereof.

The “ Assigned Rights ” shall mean the Seller Names and any other trademark owned or purported to be owned by the Seller and/or its Affiliates used in the Business, and any goodwill or rights in the Seller Names.

“ Assumed Liabilities ” shall mean liabilities of the Seller purchased and assumed by the Buyer pursuant to the terms of the Agreement.

The “ Business ” shall mean the Seller’s solar engineering, procurement and construction businesses.

“ Business Leases ” shall mean hardware and software leased by the Seller and utilized in the Business.

“ Business Rights ” shall mean hardware and software owned by the Seller and utilized in the Business, plus Business Leases.

“ Buyer ” shall mean Arkados Group, Inc., a Delaware corporation.

“ Buyer Note ” shall mean that certain Senior Secured Convertible Promissory Note in the amount of $2,000,000, dated as of the Closing Date, to be issued to Seller as a portion of the Purchase Price in the Acquisition.

“ Buyer Preferred Stock ” shall mean the 4,000,000 shares of the Buyer’s Series A 4% Convertible Preferred Stock, par value $0.0001 per share, to be issued to Seller after the Closing and upon conversion of the Buyer Preferred Stock Note.

“ Buyer Preferred Stock Note ” shall mean that certain Convertible Promissory Note in the amount of $6,000,000, dated as of the Closing Date to be issued to Seller as a portion of the Purchase Price in the Acquisition, that is convertible into the Buyer Preferred Stock.

“ Buyer Stock Consideration ” shall mean the 4,000,000 shares of Common Stock, to be issued to Seller as a portion of the Purchase Price in the Acquisition.

The “ Buyer Indemnitees ” shall mean the Buyer, its affiliates and their respective representatives, successors and assigns for the purpose of indemnification as provided in Section 10 of the Agreement.

“ Cash Adjustment ” shall have the meaning set forth in Section 2.6 of the Agreement.

“ Cash Consideration ” shall mean the amount as set forth in Section 2.1(i) of the Agreement.

“ Certificate of Designation ” shall mean the Certificate of Designation for the Buyer’s Series A 4% Convertible Preferred Stock, to be filed prior to the Closing by Buyer with the Secretary of State of Delaware in the form of Exhibit A attached hereto.

A “ Claim ” shall mean information indicating that a right to indemnification may arise under the Agreement.

The “ Closing ” shall mean the closing of the Acquisition, subject to the terms and conditions set forth in the Agreement.

“ Closing Date ” shall mean the date of the Closing, scheduled to be no later than May 1, 2017.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Common Stock ” shall mean the Buyer’s common stock, par value $0.0001 per share.

“ Common Stock Purchase Price ” shall mean, with respect to each share of the Buyer Stock Consideration, $1.00, and with respect to all of such shares, $4,000,000 in the aggregate.

“ Consulting Agreement ” shall mean the consulting agreement to be entered into between Buyer and Seller, in substantially the form attached hereto as Exhibit 1.3 .

“ Contract ” shall mean any agreement, note, arrangement, mortgage, indenture, lease, deed of trust, license, plan, instrument or other contract of Seller.

“ Effective Time ” shall mean 12:01 AM on the Closing Date.

The “ Employees ” shall mean the employees currently employed by Seller.

“ Employee Plan ” shall mean each employee benefit plan that has been maintained by Seller which constitutes an “employee pension benefit plan” under ERISA.

“ Encumbrance ” shall mean any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.

“ Employee Benefit Plan ” shall mean each “employee benefit plan” (including each “employee benefit plan” as defined in ERISA § 3(3)), profit sharing, deferred compensation, bonus, stock option, stock purchase, vacation pay, holiday pay, pension, retirement plans, medical and any other form of compensation or benefit plan, program or arrangement of any kind regardless of whether any such plan is written or oral or provided under an employment, collective bargaining or other similar arrangement maintained or contributed to by Seller or any of its Affiliates or with respect to which Seller or any of its Affiliates have any Liability.

” Environmental Claim ” shall mean any Action, Governmental Order, lien, fine, penalty, or, as to each, any settlement or judgment arising therefrom, by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the presence, or Release of, any Hazardous Materials; or (b) material non-compliance with any Environmental Law.

” Environmental Law ” shall mean any Applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; and the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.

“ Equipment ” shall mean the Seller’s equipment relating to the Business being acquired by Buyer pursuant to the terms of the Agreement as listed on Schedule 1.1(e) of the Agreement.

“ Excluded Assets ” shall mean those assets of Seller not being sold to the Buyer as specifically referenced in Section 1.3 of the Agreement.

“ Excluded Liabilities ” shall mean those liabilities of Seller as referenced in Section 1.6 of the Agreement.

“ Excluded Projects ” shall mean the projects of Seller referenced on Schedule 1.3(b) of the Agreement.

“ Excluded Securities ” shall mean any Common Stock issued or issuable: (a) in connection with any employee benefit plan which has been approved by the board of directors of the Buyer, pursuant to which the Buyer’s securities may be issued to any employee, officer or director for services provided to the Buyer, (ii) pursuant to the terms of the Transaction Documents, and (iii) upon exercise of any rights, warrants or options to subscribe for or purchase shares of Common Stock or any securities convertible thereto or exchangeable therefor, which are outstanding on the day immediately preceding the Closing Date.

“ Governmental Authority ” shall mean any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States, any foreign country or any domestic or foreign state, county, city or other political subdivision or similar governing entity.

“ Governmental Order ” shall mean any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“ Hazardous Materials ” shall mean: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls.

The “ Indemnified Party ” shall mean the party making a claim under Section 10 of the Agreement.

The “ Indemnifying Party ” shall mean the party against whom claims are asserted under Section 10 of the Agreement.

“ Intellectual Property ” shall mean means all of the following with respect to the Business: (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents (whether utility or design), patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, (b) all trademarks, service marks, trade dress, logos, designs, shapes, configurations, slogans, trade names, corporate names, Internet domain names, and rights in telephone numbers, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith, along with all moral rights and benefits of waivers thereof, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and confidential business information (including ideas, research and development, know-how, recipes, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (f) all computer software (including source code, executable code, data, databases, and related documentation, and (g) all other proprietary rights.

“ Key Employees ” shall mean those employees listed on Schedule 3.2(j).

“ Knowledge ” or words of similar import (e.g. “knowledge,” “known,” or “aware”) with respect to any individual, shall mean the actual or constructive knowledge of such individual, after due inquiry. “Knowledge” of a corporation shall mean the actual or constructive knowledge of any member of the board of directors or any officer of the corporation, after due inquiry.

“ Law ” shall mean all laws, statutes, rules, regulations, ordinances and orders of any Governmental Authority.

“ Liability ” shall mean any liability, obligation, responsibility or commitment of any nature whatsoever, asserted or unasserted, known or unknown, absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise.

“ Licenses ” shall mean all of the Seller’s authorizations issued by any regulatory authority or agency for the Business.

“ Material Adverse Effect ” shall mean any event, occurrence, fact, condition or change that is, or could reasonably be expected to become, individually or in the aggregate, materially adverse to (a) the business, results of operations, condition (financial or otherwise) or, with respect to Seller, the assets of the Business or the value of the Assets, and with respect to Buyer, the assets of the business of Buyer or the value of the assets of Buyer; provided, however, the term “ Material Adverse Effect ” shall not include any event, occurrence, fact condition or change resulting solely from (i) the outbreak or escalation of war, hostilities or terrorist activities, or natural disasters or any escalation or change in the foregoing either in the United States or abroad, (ii) changes with a significant negative affect on the economy generally, (iii) compliance with the terms and conditions of, or the taking of any action required or contemplated by, this Agreement, or (iv) the announcement of this Agreement or the pendency of the transactions contemplated hereby, or (b) the ability of the respective party to consummate the transactions contemplated hereby on a timely basis.

“ Materials ” shall mean any existing inventory of brochures, stationery, labels, business cards, forms, promotion and advertising materials, signage or any other materials in the possession of Seller bearing the Seller Names post-closing.

“Members” shall mean Patrick Hassell and Andrew Streit, the sole members of the Seller as of the Effective Date and as of the Closing.

“ Non-Compete Period ” shall mean thirty-six (36) months following the Closing Date.

A “ Notice ” shall mean any notice, communication, demand or other writing required or permitted to be given, made or accepted by any party to this Agreement.

“ Ordinary Course of Business ” shall mean, in respect of any Person, the ordinary course of such Person’s business, as conducted by such Person in accordance with past practice (including with respect to frequency and amount) and undertaken by such Person in good faith and not for purposes of evading any covenant or restriction in this Agreement or any Transaction Document.

“ Permit ” shall mean any permit, application, notice, waiver, qualification, license, import licenses, export license, franchise, consent, certificate, certificate of occupancy, order, exemption, registration, filing, authorization, approval or registration issued by any regulatory authority or agency.

“ Permitted Encumbrances ” shall mean (i) statutory liens for current Taxes, assessments or other governmental charges not yet due or the amount or validity of which is being contested in good faith by appropriate proceedings, and (ii) mechanics’, carriers’, workers’, repairers’ and similar Encumbrances arising or incurred in the Ordinary Course of Business securing amounts that are not yet due and payable, that are not material to the business, operations and financial condition of property of Seller so encumbered and that are not resulting from a breach, default or violation by Seller or any of its Affiliates of any Contract or Law.

“ Person ” shall mean and includes any individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization or any Governmental Authority or any department, agency or political subdivision thereof.

“ Preferred Stock Purchase Price ” shall mean, with respect to each share of the Buyer Preferred Stock, $1.50.

“ Purchase Price ” shall mean the total purchase price to be paid by Buyer to Seller for the Assets, consisting of the Cash Consideration, Buyer Note, Buyer Stock Consideration, Buyer Preferred Stock Consideration, the Assumed Liabilities and, if applicable, the Cash Adjustment.

“ Reasonable Efforts ” shall mean the good faith efforts that a reasonably prudent Person desirous of achieving a result would use in similar circumstances to ensure that such result is achieved as expeditiously as reasonably possible, but without the requirement of incurring any material out-of-pocket expenses (other than such party’s own legal or accounting fees) or of conceding any legally enforceable rights in connection therewith.

“ Release ” shall mean any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).

“ Representative ” shall mean, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

“ Restricted Period ” shall have the meaning set forth in Section 6.1 of the Agreement.

“ Required Consents ” shall mean those consents set forth on Schedule 3.2(e) of the Agreement.

“Schedules ” shall mean the disclosure schedules delivered by Seller and Buyer concurrently with the execution and delivery of this Agreement.

“ Securities ” shall mean, collectively, the Buyer Note, Buyer Stock Consideration, Buyer Preferred Stock Note and Buyer Preferred Stock.

“ Securities Act ” shall mean the Securities Act of 1933, as amended.

“ Seller ” shall mean SolBright Renewable Energy, LLC, a South Carolina limited liability company.

The “ Seller Indemnitees ” shall collectively mean Seller, and as requested by Seller, its Affiliates and representatives, successors and assigns for the purpose of indemnification as provided in Section 10 of the Agreement.

“ Seller Lock-Up Agreement ” shall mean the lock-up agreement to be executed by Seller, in the form attached hereto as Exhibit 6.3 .

“ Seller Names ” shall mean the name “SolBright Renewable Energy, LLC.” and all other derivative or other names filed with respect thereto.

“ Seller Projects ” shall mean those projects of Seller being acquired by Buyer pursuant to the terms of this Agreement, as listed on Schedule 1.1(a) of the Agreement.

“ Tax Return ” shall mean any return, declaration, report, claim for refund, or information return or statement required to be filed with any taxing authority.

“ Taxes ” shall mean all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, documentary, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties .

“ Transaction Documents ” shall mean this Agreement, the Bill of Sale, the Assignment and Assumption Agreement, and the other agreements, instruments and documents required to be delivered at the Closing.

The “ Transferred Contracts ” are all of the material contracts, agreements and commitments, whether written or oral, of Seller listed in Schedule 1.1(h) that are used by Seller in the Business.

Exhibit 10.1

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

Principal Amount: $2,000,000

Issue Date: May 1, 2017

15% SECURED PROMISSORY NOTE

DUE May 1, 2020

FOR VALUE RECEIVED, Arkados Group, Inc., a Delaware corporation, (the “ Company “) promises to pay to SolBright Renewable Energy, LLC (which name of the entity will be changed after the Original Issue Date to SRE Holdings, LLC), or its registered assigns (the “ Holder “), or shall have paid pursuant to the terms hereunder, the principal sum of $2,000,000 (the “ Principal ”) on May 1, 2020, unless accelerated upon an Event of Default (the “ Maturity Date “), or such earlier date as this Note is required or permitted to be repaid, in whole or in part, as provided hereunder, and to pay interest to the Holder on the aggregate and then outstanding principal amount of this Note in accordance with the provisions hereof. This Note is subject to the following additional provisions:

Section 1. Definitions . For the purposes hereof the following terms shall have the following meanings:

“ Bankruptcy Event ” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

“ Business Day ” means any day except any Saturday, any Sunday, or any day which is a federal legal holiday in the United States.

“ Change of Control ” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended, the “ 1934 Act” ) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 50.1% of the voting securities of the Company (other than by conversion of the Note), (b) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50.1% of the aggregate voting power of the Company or the successor entity of such transaction, or (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 50.1% of the aggregate voting power of the acquiring entity immediately after the transaction.

“ Event of Default” shall have the meaning set forth in Section 5(a).

“ Mandatory Default Amount” means the payment of 100% of the outstanding principal amount of this Note and accrued and unpaid interest hereon, in addition to the payment of all other amounts, costs, expenses and liquidated damages due in respect of this Note.

“ Note Register” shall have the meaning set forth in Section 2(a).

“ Original Issue Date” means the date of the first issuance of this Note, regardless of any transfers of this Note and regardless of the number of instruments which may be issued to evidence such Note.

“ Outstanding Amount ” means the outstanding principal amount and any accrued but unpaid interest under this Note.

“ Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, a government or any department or agency thereof and any other legal entity.

“ Purchase Agreement” means the Asset Purchase Agreement dated as of the date hereof between the Company and the Holder, as amended, modified or supplemented from time to time in accordance with its terms.

“ Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

Section 2. Repayment and Interest .

a) Repayment . Unless earlier repaid, the Outstanding Amount shall be due and payable in full on the Maturity Date. The Company shall make interest–only payments to the Holder on a quarterly basis, with the first interest payment due on May 31, 2017. Additionally, the Company shall make Principal payments to the Holder on a quarterly basis as provided in Section 2(c) below, with the first interest payment due following the end of the Company’s fiscal quarter ended May 31, 2017. All payments made hereunder shall be applied first to accrued unpaid interest and then to unpaid Principal, provided, however, that any payments made pursuant to Section 2(c) shall be applied to Principal only and shall not be utilized to satisfy any accrued unpaid interest then outstanding. Principal and interest hereunder will be paid to the Person in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note (the “ Note Register ”). The Company hereby covenants and agrees that before any principal repayment will be made by the Company or its affiliates with respect to any other notes or loans for other borrowings by the Company or its affiliates, this Note must first be satisfied in full.

b) Interest Calculations . Interest at the rate of 15% per annum shall be calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder, has been made.

c) Prepayment of this Note with Prepayment Funds .

i. On the terms and conditions of this Section 2(c), the Company shall prepay this Note, in whole or in part (each such event, a “ Company Prepayment ”), in the event Prepayment Funds are determined to exist for any fiscal quarter of the Company.

ii. The Company shall prepay this Note under this Section 2(c) from time to time only if Prepayment Funds (as defined below) are available for such prepayment by delivering a written notice thereof to the Holder (the “ Company Prepayment Notice ” and the date the Holder receives such notice is referred to as the “ Company Prepayment Notice Date ”). The Company Prepayment Notice shall (x) state the date on which the applicable Company Prepayment shall occur (each a “ Company Prepayment Date ”) and (y) state the aggregate amount to be prepaid on this Note, which full amount shall be regarded as a repayment of the principal balance of this Note and shall not be utilized to offset any accrued unpaid interest then due on this Note, and (z) include a detailed calculation of the amount of the Prepayment Funds available for such quarter for the prepayment.

iii. The Company shall determine no later than 20 days after the end of each Company fiscal quarter if Prepayment Funds are available for a Company Prepayment for such quarter, and if Prepayment Funds are deemed available, then the Company shall send the Company Prepayment Notice to the Holder no later than 30 days after the end of the respective Company fiscal quarter.

iv. Nothing in this Section 2(c) shall be construed to require or permit the Company to prepay this Note if such prepayment would result in a violation of law, including any violation of the Delaware General Corporation Law.

v. “ Prepayment Funds ” shall mean during the period from the Closing Date (as defined in the Purchase Agreement) until any and all amounts due under this Note have been fully paid and this Note has been extinguished, the amount that equals (A) 25% of the earnings before interest, taxes, depreciation and amortization (“ EBITDA ”) of the “Business” (as defined in the Purchase Agreement), calculated in accordance with generally accepted accounting principles, for the Company’s last four fiscal quarters preceding the Prepayment Funds calculation, minus (B) the sum of all interest payments paid by the Company to the Holder for the Note during the last 12 months preceding the Prepayment Funds calculation, minus (C) $1,200,000; provided, however, since the Prepayment Funds calculation is intended to cover a full twelve-month period, until the Prepayment Funds calculation period includes a full twelve-month period after the Closing Date, the calculation of the Prepayment Funds shall be adjusted for each of (A) and (B) by dividing the amount so calculated in such subsection by the number of days between the Closing Date and the end of such calculation period, and then multiplying such amount by 365.

Section 3. Registration of Transfers and Exchanges .

a) Different Denominations . This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer or exchange.

b) Transfers . This Note may be transferred or exchanged only with the prior written consent of the Company and applicable federal and state securities laws and regulations.

c) Reliance on Note Register . Prior to due presentment for transfer to the Company of this Note, the Company and any agent of the Company may treat the Person in whose name this Note is duly registered on the Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

Section 4. Automatic Redemption Upon a Qualified Equity Financing . Upon the closing of an equity financing by the Company at any time after the Original Issue Date, in a single transaction or a series of related transactions, in which the Company issues equity securities which yields gross cash proceeds to the Company of at least $10,000,000 (excluding this Note and any and all redeemable or convertible notes), which is led by a bona fide third party who is not currently affiliated with the Company, and with the principal purpose of raising capital, the Maturity Date shall be accelerated to the date of closing such equity financing transaction, and the Outstanding Amount shall be paid in full by the Company to satisfy this Note.

Section 5. Event of Default .

a) “ Event of Default ” means, wherever used herein, any of the following events (whatever the reason for such event and whether such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

i. The non-payment of any of the amounts due hereunder within five (5) Business Days after the date such payment is due and payable.

ii. The dissolution or liquidation, as applicable, of the Company.

iii. The occurrence of a Bankruptcy Event.

iv. Any seizure, vesting or intervention by or under authority of a government, by which the management of the Company is displaced or its authority in the conduct of its business is curtailed.

v. The appointment of any receiver of any material property of the Company.

vi. A Change of Control occurs or any agreement or understanding that could result in a Change of Control is prepared by or for Company.

vii. The occurrence of a material breach or an event of default by the Company under this Note.

viii. Any default by the Company under, or the occurrence of any event of default as defined in, any other indebtedness (other than relating to trade payables) owed by the Company.

b) Remedies Upon Event of Default . If any Event of Default occurs, then the Mandatory Default Amount shall become, at the Holder's election, immediately due and payable. Upon the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Note to or as directed by the Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Note until such time, if any, as the Holder receives full payment pursuant to this Section 5(b). No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

c) Expenses of Collection and Attorneys’ Fees . In any Event of Default, the Company agrees to pay all expenses of collection of this Note and reasonable attorneys’ fees incurred by Holder in connection therewith.

Section 6. Security .

This Note shall be secured with a second priority lien on the accounts receivable of the Company, now or hereafter existing, relating to the solar engineering, procurement and construction business of Holder acquired by the Company pursuant to the Purchase Agreement (the “Accounts Receivables”) for so long as the Note is outstanding, with such lien being junior only to that certain first priority security position granted in the Accounts Receivables to AIP ASSET MANAGEMENT INC. (“Senior Secured Lender”) under that certain Note Purchase Agreement and that certain Security Agreement, both by and between the Company and the Senior Secured Lender and dated May 1, 2017 . The Company shall, when requested by the Holder, provide the Holder with such information and reports reasonably requested by the Holder documenting the amount of such solar engineering, procurement and construction business accounts receivable of the Company, and the amount of any appropriate reserve for such accounts receivable.

On or following the Original Issue Date, the Holder may file such UCC financing statements as it deems appropriate in the jurisdictions as it so determines to record its lien upon, and security interest in, the designated collateral. Upon repayment in full and satisfaction of the Note, the Company may file such termination statements as necessary to terminate any such previously filed financing statements.

Section 7. Miscellaneous .

a) Notices . Any and all notices or other communications or deliveries to be provided by the Holder hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company at the facsimile number or address set forth on the signature page of this Note, or such other facsimile number or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section 7(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service addressed to the Holder at the facsimile number or address set forth on the signature page of this Note, or such other facsimile number or address as the Holder may specify for such purposes by notice to the Company delivered in accordance with this Section 7(a). Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Business Day, (ii) the next Business Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number set forth on the signature pages attached hereto on a day that is not a Business Day or later than 5:30 p.m. (New York City time) on any Business Day, (iii) the second Business Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required to be given.

b) Absolute Obligation . Except as expressly provided herein, no provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable, on this Note at the time, place, and rate, and in the coin or currency, herein prescribed. This Note is a direct debt obligation of the Company.

c) Lost or Mutilated Note . If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, reasonably satisfactory to the Company.

d) Governing Law . All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflict of laws thereof. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Note or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any provisions of this Note, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

e) Waiver . Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note on any other occasion. Any waiver by the Company or the Holder must be in writing.

f) Severability . If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such power as though no such law has been enacted.

g) Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief . The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and any of the other transaction documents entered into in connection with the Purchase Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Holder's right to pursue actual and consequential damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available remedies, to an injunction restraining any such breach or any such threatened breach, without the necessity of showing economic loss and without any bond or other security being required. The Company shall provide all information and documentation to the Holder that is requested by the Holder to enable the Holder to confirm the Company's compliance with the terms and conditions of this Note.

h) Next Business Day . Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day

i) Headings . The headings contained herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

(Signature Pages Follow)

IN WITNESS WHEREOF, the Company has caused this Secured Promissory Note to be duly executed by a duly authorized officer as of the date first above indicated.

	COMPANY:
	Arkados Group, Inc.

	By:	/s/ Terrence DeFranco
	Name: Terrence DeFranco
	Title: Chief Executive Officer

	Address:

	Facsimile:

AGREED TO AND ACCEPTED:

HOLDER:
SolBright Renewable Energy, LLC

By:	/s/ Patrick Hassell
Name: Patrick Hassell
Title: Managing Director

Address:

Facsimile:

Exhibit 10.2

NEITHER THIS CONVERTIBLE PROMISSORY NOTE NOR ANY OF THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE " SECURITIES ACT "), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

CONVERTIBLE PROMISSORY NOTE

$6,000,000

Number: PS-1

Date: May 1, 2017

Newark, New Jersey

FOR VALUE RECEIVED, ARKADOS GROUP, INC., a Delaware corporation (" Issuer "), promises to pay to SOLBRIGHT RENEWABLE ENERGY, LLC , a South Carolina limited liability company (" Lender ), the principal sum of six million dollars ($6,000,000) together with interest from the date of this Note on the unpaid principal balance, upon the terms and conditions specified below. This Note is issued pursuant to that certain Asset Purchase Agreement, dated as of the date hereof, by and among Issuer and the Lender (the " Purchase Agreement "). Additional rights of Lender are set forth in the Purchase Agreement.

Payment .

1.1 Maturity . Subject to the provisions of Section 2 hereof relating to the conversion of this Note, the outstanding principal balance of this Note, together with interest accrued and unpaid to date, shall be due and payable upon the earliest to occur of (i) the Maturity Date; or (ii) following an Event of Default, upon demand by Lender (other than an Event of Default contemplated by Section 4.3 or 4.4 hereof, in which case no demand shall be necessary).

1.2. Interest . This Note shall accrue simple interest, from the date hereof until such principal is paid or converted as provided in Section 2 , on any unpaid principal balance at the rate of four percent (4%) per annum; provided, however, to the extent permitted by law, upon the occurrence and during the continuation of an Event of Default, this Note shall accrue simple interest at a rate of twelve percent (12%) per annum. Interest shall be calculated on the basis of actual number of days elapsed based on a year of three hundred sixty five (365) days. Interest shall be paid quarterly in arrears commencing on May 1, 2017 and on the first Business Day of each August, November, February and May thereafter. Notwithstanding any provision in this Note, it is the parties' intent not to contract for, charge or receive interest at a rate that is greater than the maximum rate permissible by law that a court of competent jurisdiction shall deem applicable hereto (which under applicable law shall be deemed to be the laws relating to permissible rates of interest on commercial loans). If any interest payment due hereunder is determined to be in excess of the legal maximum rate, then that portion of each interest payment representing an amount in excess of the then legal maximum rate shall instead be deemed a payment of principal and shall be applied against principal.

1.3. Payments; Allocation of Payments . Principal and interest are payable in lawful money of the United States of America. All payments shall be credited first to interest, fees, costs and expenses then due and the remainder to the principal amount of the Obligations. All payments shall be made at such address as the Lender shall hereafter give to the Issuer by written notice made in accordance with the provisions of this Note.

1.4. Prepayment of the Note . Except as provided in Section 1.5 below, Issuer may not prepay all or any portion of the amount due under this Note without the prior written consent of the Lender.

1.5 Prepayment of the Note with Prepayment Funds .

(A) On the terms and conditions of this Section 1.5 , the Issuer shall prepay the Note in whole or in part (each such event, a “ Company Prepayment ”) in the event Prepayment Funds are determined to exist for any fiscal quarter of the Issuer.

(B) The Issuer shall prepay the Note under this Section 1.5 from time to time only if Prepayment Funds (as defined below) are available for such prepayment by delivering a written notice thereof to the Lender (the “ Company Prepayment Notice ” and the date the Lender receives such notice is referred to as the “ Company Prepayment Notice Date ”). The Company Prepayment Notice shall (x) state the date on which the applicable Company Prepayment shall occur (each a “ Company Prepayment Date ”) and (y) state the aggregate amount to be prepaid on the Note, designating the amount to be paid towards satisfaction of all accrued interest on the Note through the Company Prepayment Date and the amount to be regarded as a repayment of the principal balance of the Note and (z) include a detailed calculation of the amount of the Prepayment Funds available for such quarter for the prepayment.

(C) The Issuer shall determine no later than 20 days after the end of each Issuer fiscal quarter if Prepayment Funds are available for a Company Prepayment for such quarter, and if Prepayment Funds are deemed available, then the Issuer shall send the Company Prepayment Notice to the Lender no later than 30 days after the end of the respective Issuer fiscal quarter.

(D) Nothing in this Section 1.5 shall be construed to require or permit the Issuer to prepay the Note if such prepayment would result in a violation of law, including any violation of the Delaware General Corporation Law.

(E) “ Prepayment Funds ” shall mean (a) during the period from the Closing Date (as defined in the Purchase Agreement) until any and all amounts due under the Buyer Promissory Note have been fully paid and the Buyer Promissory Note has been extinguished, the amount that equals (i) 50% of the earnings before interest, taxes, depreciation and amortization (“EBITDA”) of the “Business” (as defined in the Purchase Agreement), calculated in accordance with generally accepted accounting principles, for the last four quarters preceding the Prepayment Funds calculation, minus (ii) the sum of all interest payments paid by the Issuer to the Lender for the Note during the last 12 months preceding the Prepayment Funds calculation, minus (iii) $1,200,000; and (b) during the period from the date the Buyer Promissory Note has been extinguished until this Note has been full paid and extinguished, the amount that equals (x) 100% of the EBITDA of the “Business” (as defined in the Purchase Agreement), calculated in accordance with generally accepted accounting principles, for the last four quarters preceding the Prepayment Funds calculation, minus (y) the sum of all interest payments paid by the Issuer to the Lender for the Note during the last 12 months preceding the Prepayment Funds calculation, minus (z) $1,200,000; provided, however, since the Prepayment Funds calculation is intended to cover a full twelve-month period, until the Prepayment Funds calculation period includes a full twelve-month period after the Closing Date, the calculation of the Prepayment Funds shall be adjusted for each of (a)(i) and (ii), and (b)(x) and (y) above, by dividing the amount so calculated in such subsection by the number of days between the Closing Date and the end of such calculation period, and then multiplying such amount by 365.

Conversion .

2.1. Automatic Conversion . In the event that prior to the Maturity Date, the Company Stockholder Approval is obtained and the filing of the Certificate of Designation is deemed effective by the State of Delaware’s Secretary of State, the Actual Conversion Amount shall be automatically converted, in whole and not in part, without any further action of Lender, into shares of Series A Preferred Stock on the date that the Certificate of Designation filing is deemed effective. The number of shares of Series A Preferred Stock to be issued to Lender upon conversion pursuant to this Section 2.1 shall equal (i) the Actual Conversion Amount, divided by (ii) the Conversion Price.

2.2. Delivery of Note and Share Certificates . In connection with the automatic conversion of the Actual Conversion Amount pursuant to Section 2.1 , the Lender agrees to deliver the original of this Note (or a notice to the effect that the original Note has been lost, stolen or destroyed and an agreement acceptable to the Issuer whereby the Lender agrees to indemnify the Issuer from any loss incurred by it in connection with this Note) at the time of automatic conversion for cancellation; provided, however , that upon satisfaction of the conditions set forth in Section 2.1, this Note shall be deemed converted and of no further force and effect, whether or not it is delivered for cancellation as set forth in this sentence. Upon conversion of the Actual Conversion Amount and delivery and surrender of this Note to Issuer duly endorsed and marked cancelled and paid, Issuer shall issue and deliver to Lender a certificate or certificates for the number of full shares of Series A Preferred Stock to which Lender is entitled under the terms set forth in Section 2.1 and with legends required by applicable state and federal securities laws in the opinion of counsel to the Issuer. No fractional shares shall be issued upon conversion of this Note. In lieu of the Issuer issuing any fractional shares to the Lender upon the conversion of this Note, the Issuer shall pay to Lender an amount equal to the product obtained by multiplying the Conversion Price by the fraction of a share not issued pursuant to the previous sentence. Issuer covenants that all shares of Series A Preferred Stock issued upon conversion will, upon issuance, be duly authorized and validly issued, fully paid and non-assessable and free from all taxes, liens and charges caused or created by Issuer with respect to the issuance thereof.

2.3. Adjustment for Splits, Subdivisions or Combinations of Shares and Stock Dividends . Without limiting any provision of this Note, if the Issuer, at any time after the date hereof, (1) pays a stock dividend on one or more classes of its then outstanding shares of Series A Preferred Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Series A Preferred Stock, (2) subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its then outstanding shares of Series A Preferred Stock into a larger number of shares or (3) combines (by combination, reverse stock split or otherwise) one or more classes of its then outstanding shares of Series A Preferred Stock into a smaller number of shares, then in each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Series A Preferred Stock, as applicable, outstanding immediately before such event and of which the denominator shall be the number of shares of Series A Preferred Stock, as applicable, outstanding immediately after such event. Any adjustment made pursuant to clause (1) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (2) or (3) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this paragraph occurs during the period that a Conversion Price is used in any calculation hereunder, then in such calculation such Conversion Price shall be adjusted appropriately to reflect such event.

2.4 Adjustment for Fundamental Transaction s. Prior to the consummation of each Fundamental Transaction pursuant to which holders of shares of Series A Preferred Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Series A Preferred Stock (a “ Corporate Event ”), the Issuer shall make appropriate provision to insure that the Lender will thereafter have the right to receive upon conversion of this Note at any time after the consummation of the applicable Fundamental Transaction but prior to the repayment in full of this Note, in lieu of the shares of the Series A Preferred Stock (or other securities, cash, assets or other property) issuable upon the conversion of this Note prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Lender would have been entitled to receive upon the happening of the applicable Fundamental Transaction had this Note been converted immediately prior to the applicable Fundamental Transaction (without regard to any limitations on the conversion of this Note). Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Lender. The provisions of this Section 2.4 shall apply similarly and equally to successive Fundamental Transactions and Corporate Events.

2.5 Notice of Adjustments . The Issuer shall promptly give written notice of each adjustment of the Conversion Price or the number or type of shares of Series A Preferred Stock or other securities or property issuable upon conversion of this Note that is required under this Section 2 . The notice shall describe the adjustment or readjustment and show in reasonable detail the facts on which the adjustment or readjustment is based.

2.6 No Change Necessary . The form of this Note may, but need not, be changed because of any adjustment in the Conversion Price or in the number or type of shares of Series A Preferred Stock issuable upon its conversion.

3. Demand; Protest; Expenses . Issuer waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, diligence in collection and notices of intention to accelerate maturity, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees at any time held by Lender on which Issuer may in any way be liable and all other notices or demands relative to this instrument.

4. Event of Default . If there shall be any Event of Default hereunder, at the option and upon the declaration of Lender and upon written notice to Issuer (which declaration and notice shall not be required in the case of an Event of Default under Section 4.3 or 4.4), this Note shall accelerate and all principal and unpaid accrued interest shall become due and payable. Subject to the provisions hereof, Lender shall have all rights and may exercise any remedies available to it under law, successively or concurrently. The occurrence of any one or more of the following shall constitute an Event of Default:

4.1. Issuer fails to pay any principal, interest or other amount due hereunder within five (5) business days after the date such payment is due and payable;

4.2. Issuer fails to perform any covenant under this Note in a timely manner or any representation or warranty of Issuer hereunder shall be inaccurate in any material respect when made;

4.3. Issuer (i) applies for or consents to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property; (ii) is unable, or admits in writing its inability, to pay its debts generally as they mature; (iii) makes a general assignment for the benefit of its or any of its creditors; (iv) is dissolved or liquidated in full or in part; (v) becomes insolvent (as such term may be defined or interpreted under any applicable statute); (vi) commences a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consents to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it; or (vii) takes any action for the purpose of effecting any of the foregoing;

4.4. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Issuer or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Issuer or the debts thereof under any bankruptcy, insolvency or other similar law or hereafter in effect are commenced and an order for relief entered or such proceeding is not dismissed or discharged within sixty (60) days of commencement;

4.5. Issuer is in default under indebtedness of Issuer which in the aggregate exceeds One Hundred Thousand Dollars ($100,000) or in the performance of or compliance with any term of any evidence of any such indebtedness or of any mortgage, indenture or other agreement relating thereto the effect of which is to cause such indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment, and such default, event or condition continues for more than the period of grace, if any, specified therein and not waived pursuant thereto; provided, however, that for purposes of this Section 4.5, indebtedness shall not include trade payables arising in the ordinary course of the business of the Issuer;

4.6. A Change of Control involving the Issuer occurs or any definitive agreement that will result in a Change of Control of the Issuer is executed by the Issuer.

4.7. There occurs a material breach or an event of default by the Issuer under this Note or under the Buyer Promissory Note.

5. Definitions . For the purposes hereof, in addition to the terms defined elsewhere in this Note, (a) capitalized terms not otherwise defined herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:

5.1. “ Actual Conversion Amount ” means all of the Balance actually converted into Series A Preferred Stock pursuant to Section 2.1 , on an Actual Conversion Date, including, if accrued interest and expenses convert pursuant to the terms of this Note, interest and expenses accrued through such Actual Conversion Date and actually converted into Series A Preferred Stock; provided, however, it is understood and agreed that the Lender shall have the option to either include the accrued interest and expenses on this Note through the Actual Conversion Date in the Actual Conversion Amount, or alternatively requiring the payment by the Issuer of all accrued interest and expenses on this Note through the Actual Conversion Date to the Lender by check or wire transfer on the Actual Conversion Date, in which event such amounts shall not be included in the Actual Conversion Amount.

5.2. “ Actual Conversion Date ” means a date on which all of the Balance of this Note is converted pursuant to Section 2.1 .

5.3. “ Balance ” means, at the applicable time, the sum of all then outstanding principal of this Note, all then accrued but unpaid interest and all other amounts then accrued but unpaid under this Note.

5.4. “ Buyer Promissory Note ” means that certain 15% Secured Promissory Note of even date hereof issued by the Issuer to Lender in connection with the Purchase Agreement.

5.5 “ Certificate of Designation ” means the Certificate of Designation of Preferences, Rights and Limitations of Series A 4% Convertible Preferred Stock of the Issuer in the form attached as Exhibit A to this Note.

5.6. “ Change of Control ” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended) of effective control (whether through legal or beneficial ownership of capital stock of the Issuer, by contract or otherwise) of in excess of 50.1% of the voting securities of the Issuer, (b) the Issuer merges into or consolidates with any other Person, or any Person merges into or consolidates with the Issuer and, after giving effect to such transaction, the stockholders of the Issuer immediately prior to such transaction own less than 50.1% of the aggregate voting power of the Issuer or the successor entity of such transaction, or (c) the Issuer sells or transfers all or substantially all of its assets to another Person and the stockholders of the Issuer immediately prior to such transaction own less than 50.1% of the aggregate voting power of the acquiring entity immediately after the transaction.

5.7 “ Common Stock ” means the Issuer’s common stock, par value $0.0001 per share.

5.8 “ Company Stockholder Approval " means the approval of the Company’s stockholders required under the Company’s constitution documents required to allow the Company or its board of directors to establish the terms and conditions of the Series A Preferred Stock.

5.9. " Conversion Price " means $1.50 per share, as adjusted for stock splits, stock dividends, recapitalizations, combinations and the like.

5.10. “ Fundamental Transaction ” means that (i) the Issuer shall, directly or indirectly, in one or more related transactions, (1) consolidate or merge with or into (whether or not the Issuer is the surviving corporation) any other Person, or (2) sell, lease, license, assign, transfer, convey or otherwise dispose of all or substantially all of its respective properties or assets to any other Person, or (3) allow any other Person to make a purchase, tender or exchange offer that is accepted by the holders of more than 50% of the outstanding shares of Voting Stock of the Issuer (not including any shares of Voting Stock of the Issuer held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), or (4) consummate a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with any other Person whereby such other Person acquires more than 50% of the outstanding shares of Voting Stock of the Issuer (not including any shares of Voting Stock of the Issuer held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination), or (5) reorganize, recapitalize or reclassify the Series A Preferred Stock, or (ii) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations promulgated thereunder) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Voting Stock of the Issuer.

5.11. " Maturity Date " means July 31, 2018.

5.12. " Obligations " means all debt, principal, interest, expenses and other amounts owed to Lender by Issuer pursuant to this Note, whether absolute or contingent, due or to become due, now existing or hereafter arising.

5.13. “ Person ” shall mean an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

5.14. " Series A Preferred Stock " means the Series A 4% Convertible Preferred Stock of Issuer, $0.0001 par value per share.

5.15. “ Voting Stock ” of a Person means capital stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power to elect, or the general power to appoint, at least a majority of the board of directors, managers or trustees of such Person (irrespective of whether or not at the time capital stock of any other class or classes shall have or might have voting power by reason of the happening of any contingency).

6. Amendment Provisions . This Note may not be amended or modified, nor may any of its terms be waived, except by written instruments signed by Issuer and Lender. No waivers of or exceptions to any term, condition or provision of this Note, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such term, condition or provision.

7. Severability . The invalidity or unenforceability of any provision of this Note shall not affect the validity or enforceability of any other provision of this Note.

8. Transfer; Assignment; Binding Effect . This Note is binding upon the successors and assigns of the Issuer and will inure to the benefit of the Lender and its respective successors and permitted assigns; provided, however, that the Issuer will not assign, delegate or otherwise transfer any of its respective rights or obligations under this Note without the prior written consent of the Lender. The Lender may not assign, participate, pledge, grant a security interest in, or otherwise transfer all or any portion of its rights and obligations under this Note without the prior written consent of the Issuer. If the Issuer consents to any transfer, upon such transfer the Lender will notify the Issuer and the Issuer will execute and deliver a new promissory note, in substantially the form of this Note, to such permitted assign. Each new Note issued upon any transfer of this Note shall bear a legend as to the applicable restrictions on transferability to ensure compliance with the Securities Act, unless in the opinion of counsel for the Issuer such legend is not required in order to ensure compliance with the Securities Act. The Issuer may issue stop transfer instructions to its transfer agent, if any, in connection with such restrictions. Subject to the foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Issuer. Prior to presentation of this Note for registration of transfer, the Issuer shall treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Issuer shall not be affected by notice to the contrary.

9. Notices . Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 15 of the Purchase Agreement titled “Notices.”

10. No Rights as Stockholder . This Note, as such, shall not entitle Lender to any rights as a stockholder of Issuer. In the absence of conversion of this Note into Series A Preferred Stock, no provisions of this Note, and no enumeration of the rights or privileges of Lender, shall cause Lender to be a stockholder of the Issuer as a result of the issuance of this Note.

11. No Waiver; Remedies . No failure on the part of Lender or Issuer to exercise, and no delay in exercising, any right hereunder will operate as a waiver thereof; nor will any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided at law, in equity or otherwise.

12. Governing Law . This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of New York for agreements to be wholly performed therein, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding in the manner provided for the giving of notices in Section 9 and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any action at law or in equity is necessary to enforce or interpret the terms of this Note, the prevailing party will be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.

13. No Impairment . Except and to the extent as waived or consented to by Lender in accordance with Section 7 above, Issuer will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of any debt or equity securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by Issuer, but will at all times in good faith assist in the carrying out of all the provisions of this Note in order to protect the rights of Lender hereunder against impairment.

14. Further Assurances . From time to time, each of Issuer and Lender will execute and deliver such additional documents and will provide such additional information as may reasonably be required to carry out the terms of this Note and any agreements executed in connection herewith.

15. Lost or Mutilated Note . In case this Note shall become mutilated or defaced, or be destroyed, lost or stolen, the Issuer shall execute and deliver a new note of like principal amount in exchange and substitution for the mutilated or defaced Note, or in lieu of and in substitution for the destroyed, lost or stolen Note. In the case of a mutilated or defaced Note, the Lender shall surrender such Note to the Issuer. In the case of any destroyed, lost or stolen Note, the Lender shall furnish to the Issuer: (i) evidence to its satisfaction of the destruction, loss or theft of such Note and (ii) such security or indemnity as may be reasonably required by the Issuer to hold the Issuer harmless.

16. Headings, Titles and Subtitles . The headings, titles and subtitles herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the Issuer has caused this Convertible Promissory Note to be duly executed and delivered as of the date first above written.

ARKADOS GROUP, INC.

By:	/s/ Terrence DeFranco
Name: Terrence DeFranco
Title: President

EXHIBIT A

CONVERTIBLE PROMISSORY NOTE

FORM OF

CERTIFICATE OF DESIGNATION OF PREFERENCES, RIGHTS AND
LIMITATIONS OF SERIES A 4% CONVERTIBLE PREFERRED STOCK

Exhibit A to Convertible Promissory Note

Exhibit 10.3

Note Purchase Agreement

in respect of

10% SECURED CONVERTIBLE NOTES

issued by

ARKADOS GROUP, INC

May 1, 2017

TABLE OF CONTENTS

	Article 1
	INTERPRETATION

1.1	Definitions	2
1.2	Gender and Number	14
1.3	Interpretation Not Affected by Headings, etc.	14
1.4	Monetary References	14
1.5	References	14
1.6	Invalidity of Provisions	14
1.7	This Agreement to Govern	15
1.8	Actions on Days Other Than Business Days	15
1.9	Interest Act	15
1.10	Meaning of 'outstanding' for certain purposes	15
1.11	Permitted Liens	15

	Article 2
	AUTHORIZATION, PURCHASE AND SALE OF NOTES

2.1	Authorization of Notes	16
2.2	Sale and Purchase of Notes; Issuance of Notes	16
2.3	Pari-Passu Ranking	16
2.4	Legend	16

	Article 3
	CONDITIONS TO CLOSING OF NOTES

3.1	Conditions to Closing of Initial Notes	17

	Article 4
	PAYMENTS

4.1	Calculation and Payment of Interest	20
4.2	Commitment Fee	21
4.3	Closing Fee	21
4.4	Break Fee	21
4.5	Mandatory Repayment	21
4.6	Prepayment Option	21
4.7	Payments Generally	21
4.8	Payments - No Deduction	22
4.9	Illegality	22
4.10	Payment of Costs and Expenses	22
4.11	Indemnities	23
4.12	Maximum Rate of Interest	24

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	Article 5
	SECURITY

5.1	Security	24
5.2	Further Assurances - Security	25
5.3	Security Effective Notwithstanding Date of Advance	25
5.4	No Merger	25
5.5	Release of Security	25

	Article 6
	CONVERSION OF NOTES

6.1	Applicability of Article	26
6.2	Manner of Exercise of Right to Convert	27
6.3	Cancellation of Converted Notes	27

	Article 7
	REPRESENTATIONS AND WARRANTIES

7.1	Representations and Warranties of the Company and the Guarantors	27
7.2	Survival of Representations and Warranties	32
7.3	Representations and Warranties of the Holders	32

	Article 8
	COVENANTS

8.1	Affirmative Covenants	33
8.2	Reporting Requirements	37
8.3	Negative Covenants	39
8.4	Environmental Compliance and Indemnity	41
8.5	Entitled to Perform Covenants	42

	Article 9
	EVENTS OF DEFAULT AND REMEDIES

9.1	Events of Default	42
9.2	Remedies Upon Default	45
9.3	Distributions	45
9.4	Notice of Events of Default	45
9.5	Acceleration	46
9.6	Waiver of Default	46
9.7	Remedies of Security Agent	46
9.8	Receiver or Receiver Manager	48
9.9	No Suits by Holders	50
9.10	Application of Proceeds by Security Agent	50
9.11	Distribution of Proceeds	51
9.12	Remedies Cumulative	51
9.13	Judgment Against the Company	51

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	Article 10
	CONCERNING THE SECURITY AGENT

10.1	Rights and Duties of Security Agent	52
10.2	Evidence, Experts and Advisers	52
10.3	Security Agent Not Required to Give Security	53
10.4	Protection of Security Agent	53
10.5	Resignation, Removal or Replacement of Security Agent	54
10.6	Acceptance of Agency	55
10.7	Authority of Security Agent	55
10.8	Indemnification	55

	Article 11
	GENERAL

11.1	Reliance and Non-Merger	56
11.2	Amendment and Waiver	56
11.3	Notices	57
11.4	Time	58
11.5	Further Assurances	58
11.6	Assignment	58
11.7	Entire Agreement	59
11.8	Governing Law	59
11.9	Attornment	59
11.10	Counterparts	59

Exhibit 1	Form of 10% Secured Convertible Note

Exhibit 2	Form of Conversion Notice

Schedule 1.1(a)	Information Relating to Holders

Schedule 1.1(b)	List of Collateral Accounts

Schedule 7.1(g)	Intellectual Property

Schedule 7.1(k)	Litigation, etc.

Schedule 7.1(m)	Financial Statements

Schedule 7.1(n)	Company and its Subsidiaries

Schedule 7.1(t)	Affiliated Transactions

Schedule 8.2(a)	Form of Officer Certificate

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NOTE PURCHASE AGREEMENT

THIS AGREEMENT is made as of the 1st day of May, 2017.

BETWEEN:

ARKADOS GROUP, INC ,

a Delaware corporation,

(the " Company ")

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AIP ASSET MANAGEMENT INC. ,

in its capacity as security agent for and on behalf of the Holders

(the " Security Agent "),

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AIP GLOBAL MACRO FUND, LP ,

in its capacity as a Holder,

(" AGMF ")

- and -

AIP GLOBAL MACRO CLASS ,

in its capacity as a Holder,

(" AGMC ")

- and -

AIP CANADIAN ENHANCE INCOME CLASS ,

in its capacity as a Holder,

(" ACEIC ")

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The other parties that become Holders from time to time,

(together with AGMF, AGMC AND ACEIC and their respective successors and assigns, collectively, the " Holders ").

WHEREAS subject to the terms and conditions set forth in this Agreement, the Company desires to issue and sell to the Holders from time to time the Notes (as defined below);

AND WHEREAS the Holders desire to purchase the Notes on the terms and conditions set forth herein;

AND WHEREAS the Security Agent has agreed to act as security agent on behalf of the Holders with regard to certain matters associated with the Notes;

NOW THEREFORE THIS AGREEMENT WITNESSES THAT, in consideration of the premises, the covenants herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party, the Company, the Security Agent and the Holders agree as follows:

Article 1

INTERPRETATION

1.1

Definitions

For the purposes of this Agreement:

" Acquisition " shall mean, with respect to any Person, any purchase or other acquisition, regardless of how accomplished or effected (including any such purchase or other acquisition effected by way of amalgamation, merger, arrangement, business combination or other form of corporate reorganization or by way of purchase, lease or other acquisition arrangements), of (a) any other Person (including any purchase or acquisition of such number of the issued and outstanding securities of, or such portion of an equity interest in, such other Person that such other Person becomes a Subsidiary of the purchaser or of any of its Affiliates) or of all or substantially all of the Property of any other Person, or (b) any division, business, operation or undertaking of any other Person or of all or substantially all of the Property of any division, business, operation or undertaking of any other Person.

" Affiliate " means, with respect to any Person, any other Person who directly or indirectly Controls, is Controlled by, or is under direct or indirect common Control with, such person, and includes any Person in like relation to an Affiliate. Notwithstanding the foregoing, the Holders and their Affiliates shall be deemed to not be Affiliates of the Company or the other Obligors for the purposes of the Loan Documents.

" Applicable Law " means, in respect of any Person, property, transaction, event or course of conduct, (i) all federal, provincial, state or municipal laws, statutes, rules, by-laws and regulations, regulatory policies, (ii) all applicable official directives, orders, judgments and decrees of Governmental Authorities (whether or not having the force of law), (iii) applicable rulings and conditions of any licence, permit, certificate, registration, authorization, consent and approval issued by a Governmental Authority, and (iv) any requirements under or prescribed by applicable common law, in each case, binding or affecting the Person, property, transaction, event or course of conduct referred to in the context in which the term is used in each case whether or not having the force of Law.

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" Arkados " means Arkados, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company.

“Arkados Energy” means Arkados Energy Solutions, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company.

" Bank Indebtedness " means Indebtedness owing to Wells Fargo Bank pursuant to the loan agreement with SolBright in the aggregate principal amount of $2,000,000.

" Bankruptcy Law " means the Bankruptcy and Insolvency Act (Canada), the Winding-Up Act (Canada), the Companies Creditor's Arrangement Act (Canada), the U.S. Bankruptcy Code or any other Canadian federal or provincial, U.S. federal, state or local law or foreign law or corporate statute relating to bankruptcy, insolvency, winding up, liquidation, reorganization or relief of debtors;

" Blocked Account Agreement " means the blocked account agreement executed by the Company in favour of the Security Agent, for and on behalf of the Holders, in respect of each of the Collateral Accounts.

" Break Fee " means $225,000.

" Business " means the business of the Company and the Obligors consisting of developing solutions that enable machine-to-machine communications and related activities of its Subsidiaries, including but not limited to activities of SolBright Renewable Energy, LLC, a solar panel manufacturer and turn-key energy solutions developer.

" Business Day " means a day (other than Saturday or Sunday) on which banks are generally open for business in Toronto, Ontario and in New York, New York.

" Business Plan " means (i) the business plan presented by the Company to the Holders prior to the Closing Date, and (ii) subsequent business plans approved by the board of managers of the Company and delivered to the Holders in accordance with Section 8.2(a)(iv).

“ Buyer Note ” means the secured convertible promissory note in the principal amount of $2,000,000, dated as of the May 1, 2017, to be issued to SolBright, which note shall be subordinated to the Notes.

“ Buyer Preferred Stock Note ” means the convertible promissory note in the principal amount of $6,000,000, dated as of the May 1, 2017 to be issued to SolBright, that is convertible into preferred stock of the Company

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" Cash Equivalents " means:

(a)

marketable obligations issued or unconditionally guaranteed by the Canadian or United States government, or any province or state thereof maturing within 12 months of the date of acquisition, in each case having a rating of "A-" (or the then equivalent grade) or better by a nationally recognized rating agency;

(b)

certificates of deposit, guaranteed investment certificates, term deposits and bankers' acceptances maturing within 12 months of the date of acquisition, and overnight bank deposits, in each case which are issued by a commercial bank organized under the laws of Canada or the United States or any province, state or district thereof having a senior unsecured rating of "A-" or better by S&P or Moody's;

(c)

repurchase obligations with a term of not more than 30 days for underlying investments of the types described in clauses (a) and (b) entered into with any bank meeting the qualifications specified in clause (b); and

(d)

shares of any money market fund that has substantially all of its assets invested continuously in the types of investments referred to above, has net assets of at least $500,000,000 and has the highest rating obtainable from either Moody's or S&P.

" Change of Control " means the occurrence of any transaction or event as a result of which any Person (or group of Persons acting jointly or in concert) purchases or acquires legal or beneficial ownership, either directly or indirectly, of 50% or more (by voting power) of the outstanding shares of the Company or shares or membership interests (as applicable) of its Subsidiaries.

" Closing Date " means, unless otherwise agreed by the Company and the Security Agent, the date that is three (3) Business Days following the day all of the closing conditions set out in Section 3.1 hereto have been satisfied or waived by the Security Agent.

" Closing Fee " has the meaning given to such term in Section 4.3, which shall be paid to the Security Agent on behalf of the Note Holders.

" Collateral " means all Property of the Company and the Obligors subject to the Security.

" Collateral Accounts " means the accounts set forth in Schedule 1.1(b) hereto.

" Company Pledge Agreement " means the pledge agreement executed by the Company in favour of the Security Agent, for and on behalf of the Holders, providing for the pledge of all of shares or membership interests (as applicable) of all Subsidiaries held by the Company, substantially in the form agreed to between the parties as of the Closing Date;

" Confessions of Judgment " mean notarized affidavits of confession of judgment executed by each of the Company, Arkados, and Arkados Energy, satisfying the requirements of New York Civil Practice Law and Rules § 3218 (Judgment by confession), in form and substance satisfactory to Security Agent, in its sole discretion, which affidavits of confession of judgment may be filed by Security Agent in the Supreme Court of New York for the County of New York as provided in Section 9.7.

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" Contaminant " means any material, substance, contaminant, dangerous good, pollutant or waste that is regulated under any Environmental Law, including any petroleum product, flammable, explosive or radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing polychlorinated biophyls and anything that is deemed to be or defined as or included in the definition of "contaminant", "dangerous good", "deleterious substance", "dangerous good", "hazardous substances", "toxic substances", "hazardous materials", "subject waste", "hazardous wastes" or words of similar import under any Environmental Law or that does pose a hazard to health and/or safety of Persons or the environment, including any breakdown products or components of anything described herein.

" Control " means the possession, directly or indirectly of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and " Controlled " has a corresponding meaning.

" Date of Conversion " has the meaning given to such term in Section 6.2(a).

" Default " means any event or condition which, upon notice, lapse of time, or both, would constitute an Event of Default.

" Distribution " means:

(a)

the payment, directly or indirectly, by any Obligor of any dividends, or the making of any capital payments or redemptions, or any payment of any amount on account of any Indebtedness other than Indebtedness under the Notes; or

(b)

the payment of any bonuses, payments or distributions in respect of the profits of the Company or its Subsidiaries;

(c)

the payment of any management, consultant or similar fees or bonuses to any holder of shares of the Company or any shares or membership interests (as applicable) of its Subsidiaries or any officer, manager, employee or member of the Company or its Subsidiaries; or

(d)

the issuance by any Obligor of equity interests or options to acquire equity interests in any Obligor to any officer, manager, employee or member of such Obligor.

" Environmental Law " means any and all Applicable Laws, in each case as now or thereafter applicable or in effect, relating to environmental or occupational health and safety matters, including the regulation or protection of human health, safety or the environment or Releases or threatened Releases of Contaminants into the indoor or outdoor environment, including air, soil, surface water, ground water, wetlands, land or subsurface strata, or otherwise relating to the generation, manufacturing, processing, distribution, use, treatment, storage, disposal, transport or handling of Contaminants.

- 5 -

" Event of Default " is defined in Section 9.1.

" Excluded Taxes " means, in relation to any Person, those Taxes on income or capital (or Taxes thereon) which are imposed or levied by any jurisdiction or any political subdivision of such jurisdiction as a result of such Person: (a) being organized under the laws of such jurisdiction or any political subdivision of such jurisdiction; (b) having its principal office or lending office in such jurisdiction; (c) being resident in such jurisdiction; (d) carrying on business in such jurisdiction; or (e) not dealing at arm's length (as defined for the purposes of any taxing statute in the applicable jurisdiction) with the Company.

" Fiscal Quarter " means a period of approximately three consecutive months in each Fiscal Year ending on May 31, August 31, November 30, and February 28, as the case may be, of such year.

" Fiscal Year " means, in respect of the Company and each Obligor, a fiscal year ending on May 31 of each year.

" GAAP " means generally accepted accounting principles in the United States, including IFRS, as applicable, applied on a consistent basis.

" General Security Agreement " means the general security agreement executed by each of the Company and its Subsidiaries in favour of the Security Agent, for and on behalf of the Holders, providing for a first charge and security interest (subject only to Permitted Liens) on all the then present and future real property, personal property, fixed assets, equipment, accounts receivable, inventory, Intellectual Property and all other assets and undertaking of each of the Company and its Subsidiaries, in form and substance satisfactory to the Majority Holders, as amended, supplemented, restated or replaced from time to time.

" Governmental Authority " means any government, parliament, legislature, regulatory authority, agency, department, commission, board, instrumentality or rule-making entity of any government, parliament or legislature, or any court, tribunal, arbitration board or arbitrator or (without limitation to the foregoing) other law, regulation or rule making entity (including, without limitation, a Minister of the Crown, any central bank, Superintendent of Financial Institutions or other comparable fiscal or monetary authority or agency or authority regulating banks) having or purporting to have jurisdiction in the relevant circumstances, or any Person acting or purporting to act under the authority of any of the foregoing (including, without limitation, any arbitrator).

" Guarantee " means each guarantee executed by a Guarantor in favour of the Security Agent, for and on behalf of the Holders, in form and substance satisfactory to the Majority Holders, guaranteeing all of the Obligations hereunder, as amended, supplemented, restated or replaced from time to time.

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" Guarantee and Security Agreement " means each guarantee and security agreement executed by a Guarantor in favour of the Security Agent, for and on behalf of the Holders, in form and substance satisfactory to the Majority Holders, guaranteeing all of the Obligations hereunder, as amended, supplemented, restated or replaced from time to time and granting a first charge and security interest (subject only to Permitted Liens) on all the then present and future real property, personal property, fixed assets, equipment, accounts receivable, inventory, Intellectual Property and all other assets and undertaking of such Guarantor.

" Guarantors " means, collectively, any Person at the Security Agent discretion that guarantees the Indebtedness of the Company under the Notes from time to time, including but not limited to all Subsidiaries.

" Hedging Agreement " means, for any Person, any arrangement or transaction between that Person and any other Person which is a rate swap transaction, basis swap, forward rate transaction, interest rate option, forward foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate-swap transaction, currency option or any other similar transaction (including any option with respect to any of such transactions or arrangements) designed to protect or mitigate against risks in interest or currency exchange fluctuations.

" Holders " means, collectively, the Persons listed on Schedule 1.1(a) hereto, as updated from time to time, who have an obligation to purchase the Initial Notes on the Closing Date and " Holder " means any one of them.

" IFRS " means International Financial Reporting Standards established by the International Accounting Standards Board, as amended from time to time.

" Indebtedness " means, with respect to any Person, without duplication:

(a)

an obligation of such Person for borrowed money;

(b)

an obligation of such Person evidenced by a bond, note, debenture or similar instrument;

(c)

an obligation arising in connection with an acceptance facility or letter of credit issued for the account of such Person;

(d)

an obligation of such Person in relation to purchase money agreements, deferred purchase price payments in respect of property or services, excluding trade payables and other accrued current liabilities incurred in the ordinary course of business in accordance with customary commercial terms;

(e)

all capitalized lease obligations of such Person;

(f)

an obligation of such Person or of any other Person secured by a Lien on any property or asset owned or held by such Person, to the extent attributable to that Person's respective interest in such Property, whether or not the obligations secured thereby shall have been assumed;

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(g)

the net amount of all obligations of such Person (determined on a marked-to-market basis) under Hedging Agreements; or

(h)

all guarantee, indemnity or financial support obligations of such Person determined in accordance with GAAP.

" Initial Notes " means the Tranche A Notes in the principal amount of $2,500,000 issued by the Company to the Holders on the Closing Date under this Agreement.

" Intellectual Property " means all licenses, trademarks, patents, copyrights and agreements with respect to the usage of technology or other permits that are necessary for the operation of or used in connection with the Business.

" Interest Payment Date " is defined in Section 4.1(b).

" Interest Rate " is defined in Section 4.1(b).

" Investment " in any Person means any direct or indirect (a) acquisition of any equity interest in such Person, or (b) any loan or advance made to such Person and, in determining the amount of any Investment involving a transfer of any Property other than cash, that Property will be valued at its fair value at the time of such transfer.

" Lien " means any mortgage, charge, pledge, hypothecation, assignment by way of security, deposit arrangement intended to secure the payment or performance of an obligation, lien (statutory or otherwise), preference, priority, security interest or other charge or encumbrance of any nature however arising, or any other agreement or arrangement creating in favour of any creditor a right in respect of any particular property, and includes the right of a lessor under a capitalized lease obligation, the right of a vendor under a conditional sale agreement and any easement, right of way or other encumbrance on real property.

" Loan Documents " means this Agreement, the Notes, the Security Documents, each Guarantee and Security Agreement, any other Guarantee and all other agreements, instruments and documents from time to time (both before and after the date of this Agreement) delivered in connection therewith.

" Majority Holders " means the Holder or Holders of greater than 85% of the aggregate outstanding Principal Amount of Notes.

" Material Adverse Effect " means any event or occurrence of whatever nature that could reasonably be expected to result in a material adverse effect on:

(a)

the business, property, condition (financial or otherwise) or prospects of the Company and its Subsidiaries, taken as a whole,

(b)

the ability of the Company or any other Obligor to pay or perform or comply with any of their material obligations under the Loan Documents;

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(c)

the validity, perfection or priority of the Liens on the Collateral in favour of the Security Agent and the Holders or the value of the Collateral;

(d)

the validity or enforceability of any of the Loan Documents; or

(e)

the ability of the Security Agent or the Holders to enforce their rights and remedies under the Loan Documents or any related document, instrument or agreement.

" Maturity Date " means the date which is one year after the Closing Date. The Security Agent may conduct semi-annual reviews. If such reviews determine that an Event of Default has occurred or is occurring the Security Agent, at the direction of the Majority Holders, may exercise any remedies permitted by this agreement.

" Moody's " means Moody's Investors Service, Inc. or any successor thereto.

" Notes " means, collectively, any and all Tranche A Notes, and " Note " means any one of them.

" Notice of Conversion " has the meaning given to such term in Section 6.2(a).

" Obligations " means, with respect to the Notes, all indebtedness, liabilities and other obligations owed to the Holders under this Agreement or under any other Loan Document, whether actual or contingent, direct or indirect, matured or not, now existing or hereafter arising.

" Obligors " means, collectively, the Company and each Guarantor and " Obligor " means any one of them.

" Operating Agreement " means the Limited Liability Company Operating Agreement for Arkados Energy or SolBright, as the case may be, executed by and among each of the Persons whose names are set forth on Exhibit A thereto and such other Persons who from time to time are admitted as members of the Company or engaged as managers of the Company and whose names are set forth on Exhibit A.

" Percentage Interest " has the meaning specified in the Operating Agreement.

" Permitted Indebtedness " means,

(a)

Purchase Money Obligations in an aggregate principal amount not exceeding $10,000 at any time;

(b)

the Obligations;

(c)

Indebtedness that is expressly subordinated by its terms to the Obligations, on terms satisfactory to the Security Agent, for and on behalf of the Majority Holders, acting reasonably;

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(d)

intercompany Indebtedness between Obligors that is subordinated by its terms to the Obligations on terms and conditions satisfactory to the Security Agent for and on behalf of the Majority Holders, acting reasonably;

(e)

other Indebtedness (the principal amount of which (when aggregated with the outstanding principal amount of any other Indebtedness incurred under this paragraph)) does not exceed $10,000 (or its equivalent in another currency or currencies);

(f)

the Buyer Note;

(g)

The Buyer Preferred Stock Note; and

(h)

the assumed liabilities as defined in the Asset Purchase Agreement between the Company and SolBright dated as of May 1, 2017, which liabilities are subordinated to the Notes.

" Permitted Liens " means, in respect of any property of the Obligors, any of the following:

(a)

Liens for taxes, assessments or government charges, including charges for workers' compensation and employment insurance, which are not due or delinquent, or if due or delinquent, the validity of which is being contested diligently and in good faith by appropriate proceedings;

(b)

Liens imposed or permitted by law such as carriers' liens, builders' liens, materialmen’s liens and other liens, privileges or other charges of a similar nature, in respect of obligations not yet due or delinquent, or if due or delinquent, the validity of which is being contested diligently and in good faith by appropriate proceedings;

(c)

undetermined or inchoate Liens arising in the ordinary course of and incidental to construction or current operations which have not been filed pursuant to law and in respect of which no steps or proceedings to enforce such Liens have been initiated, and which relate to obligations which are not due or delinquent, or if due or delinquent, the validity of which is being contested diligently and in good faith by appropriate proceedings;

(d)

the Security;

(e)

Liens of judgments rendered or claims filed which are being contested in good faith by it by proper legal proceedings, provided that such proceedings effectively postpone enforcement of any such Lien and do not otherwise result in an Event of Default hereunder;

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(f)

licences, easements, rights-of-way, servitudes, zoning, and similar rights in or restrictions in respect of land (including rights-of-way and servitudes for railways, sewers, drains, gas and oil pipelines, gas and water mains, electric light and power and telephone or telegraph or cable television conduits, poles, wires and cables) granted to or reserved or taken by other Persons, which do not, individually or in the aggregate detract from the value of, or impair the use of, the property subject thereto or any significant part thereof;

(g)

the reservations, limitations, provisos and conditions in any original grants from the Crown or any governmental authorities of any land or interests therein and statutory exceptions, qualifications and reservations in respect of title;

(h)

defects in title which are not general in application and which do not, individually or in the aggregate, detract from the value of, or impair the use of, the property or any significant part thereof;

(i)

Liens securing Permitted Indebtedness, provided the liens granted under the Security Agreements have priority over such liens securing Permitted Indebtedness.;

(j)

Liens securing Permitted Indebtedness under clause (d) of the definition thereof, provided such Liens are subordinated to the Security and have been pledged to the Security Agent, for and on behalf of the Holders, in each case to the satisfaction of the Majority Holders;

(k)

Liens securing Permitted Indebtedness under clause (e) of the definition thereof provided such Liens are subordinated to the Security, in each case to the satisfaction of the Majority Holders;

(l)

the right reserved to, or vested in, any Person under the terms of any lease, licence, franchise, grant or permit acquired by an Obligor, or under any statutory provision, to terminate any such any lease, licence, franchise, grant or permit, or to require annual or other payments as a condition to the continuation of such right; and

(m)

Liens made or incurred in the ordinary course of business to secure the performance of bids, tenders, contracts (other than for the borrowing of money), leases or statutory obligations.

" Person " means any individual, partnership, limited partnership, joint venture, syndicate, sole proprietorship, company or corporation with or without share capital, unincorporated association, trust, trustee, executor, administrator or other legal personal representative or Governmental Authority.

" Principal Amount " means the aggregate principal amount of the Notes issued and outstanding under this Agreement from time to time.

" Property " means in respect of any Person, all or any portion of its undertaking, property, assets, both real and personal, including for greater certainty any securities in a corporation or ownership interest in any entity. "Property" shall include any real property which is legally or beneficially owned, and to the extent the Company or an Obligor has an interest in real property that is other than legal or beneficial ownership, "Property" shall only include such limited interest.

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" Purchase Money Obligations " means any Indebtedness (including without limitation a capitalized lease obligation) incurred or assumed to finance all or any part of the acquisition price (not exceeding the fair market value) of any asset acquired by any of the Company and its Subsidiaries.

“ Registration Rights Agreement ” is defined in Section 3.1(m).

" Regulatory Approval " means any consent, waiver, approval or other authorization issued by or of a Governmental Authority that is necessary in order to consummate the Transactions.

" Release " means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration, including the movement of Contaminants in, on, over or through the environment.

" Relevant Jurisdictions " means, from time to time, with respect to each Obligor, the province, state or territory in Canada or the United States or relevant political subdivision in any other country: (i) where a filing or registration or new Lien document is required in order to protect, perfect or create the Liens on intangible and material tangible assets created by the Security or the interests of the Security Agent, for and on behalf of the Holders, hereunder; or (ii) such other jurisdiction reasonably determined by the Majority Holders as a jurisdiction in which a filing or registration or new Lien document is necessary or advisable to preserve, protect, perfect or create the Lien created by the Security or the interests of the Security Agent, for and on behalf of the Holders, hereunder.

" S&P " means Standard and Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or any successor thereto.

" Securities Commissions " means, collectively, the securities commissions or other securities regulatory authorities in each of the provinces and territories of Canada and of the United States and each state thereof.

" Securities Laws " means, collectively, and, as the context may require, all applicable securities laws of each of the provinces and territories of Canada and the respective regulations made thereunder, together with all applicable policy statements, instruments, blanket orders and rulings of the Securities Commissions and all discretionary orders or rulings, if any, of the Securities Commissions made in connection with the transactions contemplated by this Agreement together with applicable published policy statements of the Canadian Securities Administrators, as the context may require.

" Security " means the Liens created by the Security Documents.

" SEC Approval " has the meaning given to such term in Section 8.1(o).

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" Security Agent " means AIP Asset Management Inc. (and its successors and assigns) in its capacity as security agent under the Security.

" Security Agreements " is defined in Section 5.1.

" Security Documents " means the Security Agreements, and any other documents, filings or instruments held by the Security Agent, for and on behalf of the Holders, securing or intended to secure repayment of the Obligations, including, without limitation, the security described in Section 5.1.

" Senior Officer " means, in respect of any Person, the individual holding from time to time the position of the president, a vice-president, a director, a manager, the chief executive officer, the chief financial officer or the secretary of that Person.

" Shares " mean shares of the Company’s common stock, par value $0.0001 per share.

" SolBright " means SolBright Renewable Energy, LLC, a limited liability company organized under the laws of the State of South Carolina whose assets will be purchased and transferred to the Company at Closing.

" Solvent " means, with respect to any Person on any date of determination, that on such date (a) the fair value of the property (for clarity, calculated to include goodwill and other intangibles) of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; and (b) such Person is able to pay its debts and liabilities as they become due. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, can reasonably be expected to become an actual or matured liability;

" Subsidiaries " means any Person directly or indirectly Controlled by another Person from time to time. With respect to Arkados, Subsidiaries shall include (but shall not be limited to) Arkados Energy and Arkados, Inc.

" Super-Majority Holders " means the holder or holders of greater than 95% of the aggregate outstanding principal amount of the Notes.

" Taxes " includes all present and future income, corporation, capital gains, capital, mining, sales, harmonized sales, value-added and goods and services taxes and all stamp, franchise and other taxes and levies, imposts, deductions, duties, charges and withholdings whatsoever imposed by any Governmental Authority together with interest thereon and penalties with respect thereto, if any, and charges, fees and other amounts made on or in respect thereof;

" Tranche A Notes " means the secured convertible notes issued by the Company hereunder, and includes the Initial Notes;

" Transactions " means all agreements, undertakings, transactions and other dealings relating to or contemplated by the Loan Documents.

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" U.S. Securities Act " means the United States Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

" U.S. Securities Laws " means the U.S. federal securities laws, including without limitation, the U.S. Securities Act and applicable state securities laws.

" Warrants " mean the 2,500,000 warrants issued to the Security Holder on behalf of the Holders, permitting the holders thereof to acquire 2,500,000 Share of the Company’s common stock at an exercise price of $1 per share. Anti-dilution rights similar to those set forth in Section 6.1(d) shall apply in the case of the Warrants. The Warrants shall have a five-year term and a cashless exercise provision permitting, but not requiring, the Security Agent to exercise the warrants in a cashless exercise.

1.2

Gender and Number

Words importing the singular include the plural and vice versa and words importing gender include all genders.

1.3

Interpretation Not Affected by Headings, etc.

The division of this Agreement into Articles, Sections, subsections and paragraphs and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement. The terms "this Agreement", "Agreement", "hereof", "hereunder" and similar expressions refer to this Agreement and not to any particular Article, Section, paragraph or other portion hereof and include any agreement supplemental hereto.

1.4

Monetary References

Any reference in this Agreement to "Dollars", "dollars" or the sign "$" is a reference to the lawful currency of the United States of America.

1.5

References

Except as otherwise specifically provided, references in this Agreement to any contract, agreement (including this Agreement), document or any other instrument shall be deemed to include references to the same as varied, amended, supplemented, restated or replaced from time to time and references in this Agreement to any enactment, including without limitation, any statute, law, by-law, regulation, ordinance or order, shall be deemed to include references to such enactment as re-enacted, amended, extended or replaced from time to time. References to any Person shall be deemed to include such Person's successors and assigns, or in the case of the Obligors, such Person's permitted successors and assigns.

1.6

Invalidity of Provisions

Each of the provisions contained in this Agreement is distinct and severable and a declaration of invalidity, illegality or unenforceability of any such provision or part thereof by a court of competent jurisdiction shall not affect the validity or enforceability of any other provision hereof.

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1.7

This Agreement to Govern

If there is any inconsistency between the terms of this Agreement and the terms of any Security Document, the provisions of this Agreement will prevail to the extent of the inconsistency.

1.8

Actions on Days Other Than Business Days

Except as otherwise specifically provided herein, where any payment is required to be made or any other action is required to be taken on a particular day and such day is not a Business Day and, as a result, such payment cannot be made or action cannot be taken on such day, then this Agreement shall be deemed to provide that such payment shall be made or such action shall be taken on the first Business Day after such day.

1.9

Interest Act

For the purposes of the Interest Act (Canada) and disclosure under such Act, whenever interest to be paid under this Agreement or any Loan Document is to be calculated on the basis of a year of 365 days or 360 days or any other period of time that is less than a calendar year, the yearly rate of interest to which the rate determined pursuant to such calculation is equivalent is the rate so determined multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by either 365, 360 or such other period of time, as the case may be.

1.10

Meaning of 'outstanding' for certain purposes

Each Note will be deemed to be outstanding from the time it is issued until it is cancelled or delivered to the Company for cancellation, provided that, for the purpose of any provision of this Agreement referencing or entitling the Holder thereof to vote, sign consents, requests or other instruments or take any other action, Notes owned by the Company will be disregarded. Notes that have been partially redeemed, prepaid or repaid, will be deemed to be outstanding only to the extent of the unredeemed or unconverted part of the principal amount thereof.

1.11

Permitted Liens

The ability of the Obligors to incur or suffer to exist Permitted Liens is not, and shall not be construed as, a subordination, constructive or otherwise, of the Security to any such Permitted Lien.

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Article 2

AUTHORIZATION, PURCHASE AND SALE OF NOTES

2.1

Authorization of Notes

The Company has authorized the issue and sale of Tranche A Notes in an aggregate principal amount of $2,500,000.00. The Tranche A Notes shall be substantially in the form set out in Exhibit 1, unless otherwise agreed to by the Company and the Majority Holders.

2.2

Sale and Purchase of Notes; Issuance of Notes

(a) Subject to the terms and conditions set forth in this Agreement, including, without limitation, the conditions set out in Section 3.1, on the Closing Date, the Company shall issue and sell to the Holders and the Holders shall purchase from the Company a Tranche A Note in the aggregate principal amount of $2,500,000 (the " Initial Notes ") for an aggregate purchase price equal to $2,125,000 (the Tranche A Notes having original issue discount of 15 percent), less any deductions permitted in accordance with Article 4. On the Closing Date, the Company shall deliver to the Holders the Initial Notes in the form of a single Tranche A Note (or such greater number of Notes in denominations of at least $50,000, and increments of $50,000 in excess thereof, as a Holder may request) dated the Closing Date and registered in such Holders' names (or in the names of their respective nominees), against delivery by such Holders to the Company of immediately available funds in the amount of the purchase price therefor as set out in this Section 2.2(a) by certified cheque, bank draft or wire transfer of immediately available funds for the account of the Company, in each case, to be deposited in an account that is a Collateral Account.

(b) If on the Closing Date, the Company fails to tender a Note to the applicable Holder as provided herein, or any of the conditions specified in Section 3.1 or Section 3.2, as applicable, or agreed between the Company and the Majority Holders have not been fulfilled to the Majority Holders' satisfaction, such Holder may, at its election, be relieved of all further obligations under this Agreement, without thereby waiving any rights such Holder may have by reason of such failure or nonfulfillment.

2.3

Pari-Passu Ranking

All Notes issued hereunder will rank pari-passu with all other Notes issued under this Agreement. No amendments may be made to any Note without the same amendments being made to the other Notes. Any and all payments of principal and interest made to any holder of the Notes shall be made rateably to all Holders. Any security granted to secure the obligations of the Company to any Holder shall be granted in favour of the Security Agent, for and on behalf the Holders.

2.4

Legend

Each certificate representing the Tranche A Notes shall bear the following legends:

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THE NOTE REPRESENTED BY THIS INSTRUMENT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS AND IS OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION AND QUALIFICATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THIS NOTE MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF ONLY IF REGISTERED AND QUALIFIED UNDER APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR IN RELIANCE ON EXEMPTIONS FROM THE SUCH REGISTRATION AND QUALIFICATION.

Article 3

CONDITIONS TO CLOSING OF NOTES

3.1

Conditions to Closing of Initial Notes

The obligations of the Holders to purchase and pay for the Initial Notes to be sold to the Holders pursuant to Article 2 are subject to the fulfillment to the Holders' satisfaction of the following conditions on or prior to the Closing Date (which conditions are for the sole and exclusive benefit of the Holders and may be waived in writing by the Holders in their sole discretion):

(a)

each of the Loan Documents shall have been executed and delivered by all parties thereto, in form and substance satisfactory to the Security Agent (in its discretion except if instructed by the Majority Holders), including for greater certainty, the Initial Notes;

(b)

the representations and warranties of the Company and the other Obligors in this Agreement and the other Loan Documents shall be true and correct;

(c)

no Default or Event of Default shall have occurred and be continuing nor would any Default or Event of Default occur after giving effect to this Agreement or the issuance of the Initial Notes;

(d)

no event shall have occurred which, individually or in the aggregate has had, or could reasonably be expected to have, a Material Adverse Effect;

(e)

each of the Obligors shall have obtained all Regulatory Approvals and any other approvals, waivers, consents and authorizations required on the Closing Date to permit the Transactions to proceed in compliance with Applicable Law shall have been obtained and evidence thereof shall have been provided to the Holders;

(f)

the filings and registrations shall have been made to perfect the Security in all jurisdictions reasonably required by the Security Agent (in its discretion except if instructed by the Majority Holders), and the Security shall constitute, subject only to Permitted Liens, a first ranking charge over the Property of the Company and the Obligors (except as otherwise agreed by the Security Agent (in its discretion except if instructed by the Majority Holders) and except for Property as to which the Security Agent (in its discretion except if instructed by the Majority Holders) shall have determined in its reasonable discretion that the costs of obtaining or perfecting such Security is excessive in relation to the value of the Security to be offered thereby);

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(g)

the Security Agent, for and on behalf of the Holders, shall have received the following, in form and substance reasonably satisfactory to the Security Agent (in its discretion except if instructed by the Majority Holders):

(i)

a certificate of a Senior Officer of the Company and each other Obligor (other than Obligors that are individuals) certifying as to compliance with Section 3.1(b), 3.1(c), 3.1(d), 3.1(e) and 3.1(f) and that attached thereto are true and correct copies of the following documents, and that such documents are in full force and effect, unamended:

(A)

the certificate of formation, operating agreement and all other organizational documents of the Company and such Obligor;

(B)

a certificate of incumbency including true specimen signatures of officers or managers of the Company and such Obligor, as applicable who have executed this Agreement and/or any of the Loan Documents; and

(C)

resolutions of its board of directors (or managers in the case of a limited liability company) evidencing that all necessary action (if any), has been taken by the Company and such Obligor, as applicable, to authorize the execution, delivery and performance of the Loan Documents to which it is a party; and

(ii)

a certificate of good standing or similar certificate with respect to the Company and each other Obligor (other than Obligors that are individuals) issued by appropriate government officials of its jurisdiction of organization and any other jurisdiction in which the Company and such Obligor conducts business;

(h)

the Holders and the Security Agent, shall have received customary opinions of counsel to the Company and the other Obligors acceptable to the Security Agent (in its discretion except if instructed by the Majority Holders), including opinions with respect to the enforceability of the Loan Documents, compliance with applicable Securities Laws and U.S. Securities Laws, no Regulatory Approvals are required in connection with the Transactions other than those that have been obtained;

(i)

completion of all credit, collateral, business, financial, accounting, management, technical, operational and legal due diligence in form and substance satisfactory in all respects to the Security Agent (in its discretion except if instructed by the Majority Holders);

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(j)

the Company and each other Obligor shall establish and maintain at its expense blocked accounts as the Security Agent (in its discretion except if instructed by the Majority Holders) may specify, with such banks as are acceptable to the Security Agent (in its discretion except if instructed by the Majority Holders);

(k)

the Security Agent (who shall promptly provide to each Holder) shall have received and (in its discretion except if instructed by the Majority Holders) be satisfied with (i) a detailed schedule of sources and uses of the proceeds from the Notes, (ii) independent, third-party reports, expert opinions and valuations of the business and assets of each of the Company and Subsidiaries; (iii) cash management, collateral, inter-creditor agreements, hedging policies, and financial control systems and reporting capability of each of the Company and Subsidiaries; (iv) compliance by each of the Company and Subsidiaries, in all respects deemed material by the Holders, with applicable product approvals, licenses, environmental, health and safety, pension plan, labour statutes, and other government regulations in each province, state or jurisdiction in which the Company and Subsidiaries carry on business; (v) certificate showing sufficient amount of Collateral and availability for Initial Notes to be issued on the Closing Date and closing balance sheet; (vi) Regulatory Approvals; and (vii) background checks on key principals, managers and officers of the Company and Subsidiaries;

(l)

the Security Agent (who shall promptly provide to each Holder) shall have received, or shall receive within ten (10) days of the Closing, and (in its discretion except if instructed by the Majority Holders) be satisfied with (i) lock-up agreements from each shareholder of Arkados who owns five percent or more of the securities of Arkados, which lock-up agreements provide that each such shareholder will not sell or dispose of its equity securities in Arkados at any time any Note is outstanding and for ten days thereafter without the consent of the Security Agent, which consent may be denied for any reason, and (ii) evidence that the stock transfer agent for Arkados has put in place transfer restrictions on certificates representing such equity securities;

(m)

the Security Agent (who shall promptly provide to each Holder) shall have received and (in its discretion except if instructed by the Majority Holders) be satisfied with a registration rights agreement (“Registration Rights Agreement”) with the Company pursuant to which (i) the Security Holder may demand, at any time that any Notes are outstanding, that the Company file, if the Company is eligible to use a Form S-3 registration statement, as soon as reasonably practicable, but in no event more than 90 days following such demand, a registration statement (on Form S-3) to register (i) the Shares into which the Notes may be converted, and (ii) (collectively the “Note Holders Shares”), (ii) the Company shall bear registration expenses (exclusive of underwriting discounts and commissions) of all such registration (including the expense of one special counsel to the Security Agent not to exceed $25,000), (iii) the Security Agent shall be entitled to “piggy-back” registration rights on all Company registrations undertaken by the Company while the Notes are outstanding, and (iv) such registration statement shall remain effective for 120 days after such registration statement is declared effective by the U.S. Securities and Exchange Commission, and which Registration Rights Agreement contains such other provisions as the Security Agent reasonably requires. Notwithstanding the foregoing obligations, if the Company furnishes to the Security Agent after such request for registration, a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, then the Company shall have the right to defer taking action with respect to such filing for a period of not more than one hundred fifty (150) days after the request of Security Agent is given.

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(n)

all fees and expenses contemplated by Section 4.10 shall have been paid in full by the Company or shall be paid out of the purchase price for the Initial Notes on the Closing Date;

(o)

prior to the issuance of the Tranche A Notes, the Security Agent shall have received confirmation from the Company that it has raised enough cash (excluding any cash received by the Company for Shares purchased by the Security Agent for and on behalf of the Holder) in a securities offering to complete the acquisition of substantially all of the assets of SolBright but no less than net cash of $700,000 in a manner satisfactory to the Security Agent.

(p)

The Company shall have issued the Warrants simultaneously with the Closing.

Article 4

PAYMENTS

4.1

Calculation and Payment of Interest

(a) Each Note shall have original issue discount of 15 percent, and Interest shall accrue on the Principal Amount of each Note from and including the date of issuance until repayment in full. The interest shall accrue from day to day at the applicable Interest Rate, both before and after default, demand, maturity and judgment, and shall be calculated on the basis of the actual number of days elapsed and on the basis of a year of 365 or 366 days, as applicable.

(b) The Notes shall bear interest on the Principal Amount at rate per annum equal to 10% per annum plus, if an Event of Default has occurred, an additional 10% per annum while such Event of Default continues (the " Interest Rate "). Subject to Section 4.1(c), interest shall be calculated and payable monthly, in advance on the first day of each month (each, an " Interest Payment Date ") until the entire Principal Amount of each Note has been repaid in full.

(c) The interest for the first month any Notes are outstanding shall be payable by the Company to the Holders, in advance, on the Closing Date, as applicable, out of the purchase price of such Notes and shall be non-refundable regardless if the Notes are redeemed or otherwise repaid or converted prior to the Maturity Date.

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4.2

Commitment Fee

A commitment fee in the total amount of $225,000 shall be paid to the Security Agent, and the Security Agent acknowledges the receipt of such commitment fee by the Company, which is fully earned and non-refundable.

4.3

Closing Fee

The Company shall pay to the Security Agent for and on behalf of the Holders a closing fee of $125,000 (the " Closing Fee "), which shall be due and payable on the Closing Date and shall be paid to the Security Agent out of the proceeds of the purchase price of the Initial Notes. The closing fee shall be fully earned on the Closing Date and shall be non-refundable regardless if the Notes are redeemed or otherwise repaid or converted prior to the Maturity Date.

4.4

Break Fee

If the Company does not issue Notes to the applicable Holder in accordance with the terms set forth in this Agreement in circumstances where the Holders are willing to purchase such Notes, the Company shall pay to Security Agent the Break Fee.

4.5

Mandatory Repayment

The Principal Amount and all other accrued and unpaid interest and other amounts payable under this Agreement, shall be due and payable by the Company in full on the Maturity Date or such earlier date as may be provided for herein, including upon acceleration after the occurrence of an Event of Default.

4.6

Prepayment Option

The Company may, with the prior written consent of the Majority Holders, prepay any portion of or all of the Principal Amount of the Notes outstanding together with all accrued and unpaid interest thereon as follows:

(a)

If prepaid by the Company within 180 days, at 110% of the outstanding balance;

(b)

If prepaid by the Company between 181 days and 270 days, at 115% of the outstanding balance;

(c)

If prepaid by the Company after 270 days and prior to maturity, at 120% of the outstanding balance.

4.7

Payments Generally

All payments made pursuant to this Agreement (in respect of principal, interest or otherwise) shall be made by the Company to the Holders no later than 1:00 p.m. (Toronto time) on the due date thereof by way of wire transfer of immediately available funds by or on behalf of the Company to the account specified therefor by each Holder. Any payments received by any Holder after such time shall be considered for all purposes as having been made on the next following Business Day unless the applicable Holder otherwise agrees in writing.

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4.8

Payments - No Deduction

(a) All payments made in respect of this Agreement (in respect of principal, interest or otherwise) shall, except as required by Applicable Law, be made in full without set-off or counterclaim, and free of and without deduction or withholding for any present or future Taxes, other than Excluded Taxes, provided that if the Company is required by Applicable Law to deduct or withhold any Taxes, other than Excluded Taxes, from or in respect of any payment or sum payable to any Holder, the payment or sum payable will be increased as necessary so that after making all such deductions or withholdings, such Holder receives an amount equal to the sum it would have received if no such deduction or withholding had been made and the Company shall pay the full amount deducted to the relevant Governmental Authority in accordance with Applicable Law.

(b) If any Holder becomes liable for any such Tax in the jurisdiction in which the Company is located solely as a result of a payment being made without such Tax in that jurisdiction having been deducted or withheld, the Company shall indemnify such Holder for such Tax and any interest and penalties thereon, and the indemnity payment will be increased as necessary so that after the imposition of such Tax in that jurisdiction on the indemnity payment (including such Tax in respect of any such increase in the indemnity payment), such Holder receives the full amount of such Taxes for which it is liable in that jurisdiction.

(c) Notwithstanding the foregoing, the Company shall not be required to pay additional amounts in respect of: (i) Excluded Taxes; or (ii) amounts paid or credited to a "non-resident" for the purposes of the Income Tax Act (Canada).

4.9

Illegality

If any Applicable Law coming into force after the Closing Date, or if any change in any existing Applicable Law or in the interpretation or application thereof by any court or Governmental Authority, now or hereafter makes it unlawful for any Holder to have subscribed for or hold the Notes or to give effect to its obligations in respect thereof, such Holder may, by written notice thereof to the Company, declare its obligations under this Agreement to be terminated, and the Company shall prepay, within the time required by such law, the Principal Amount together with accrued interest thereon and any other amounts owing under this Agreement as may be applicable to the date of such payment. If any such event will, in the opinion of such Holder, affect only part of this Agreement, the remainder will be unaffected and the corresponding obligations of the Company under the Loan Documents will continue.

4.10

Payment of Costs and Expenses

The Company shall pay to the Security Agent and the Holders, on demand, all reasonable costs and expenses of each of the Security Agent and the Holders and each one's agents and any receiver or receiver-manager appointed by the Security Agent or by a court (including, without limitation, all fees, out-of-pocket expenses and disbursements of legal counsel) in connection with this Agreement and the other Loan Documents, including, without limitation:

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(a)

costs and expenses incurred in connection the preparation of this Agreement or any of the other Loan Documents;

(b)

reasonable costs and expenses incurred obtaining advice as to the Holders' and/or the Security and/or Monitoring Agents’ rights and responsibilities under this Agreement or the other Loan Documents; and

reasonable costs and expenses incurred in connection with the defence, establishment, protection or enforcement of any of the rights or remedies of the Holders and/or the Security Agent under this Agreement or any of the other Loan Documents including, without limitation, all costs and expenses of establishing the validity and enforceability of, or of collection of amounts owing under, any of the Security Documents or any enforcement of the Security including, without limitation, reasonable fees, expenses and disbursement of legal counsel to the Security Agent incurred in connection therewith.

4.11

Indemnities

The Company shall indemnify and save harmless the Security Agent and the Holders from all claims, demands, liabilities, damages, losses, costs, charges and expenses (including the fees, out-of-pocket expenses and disbursements of legal counsel to the Security Agent or the Holders), which may be incurred by the Security Agent or the Holders as a consequence of or in respect of: (a) default by the Company in the payment when due of any Obligation or any other Default or Event of Default hereunder; (b) the failure of the Company or any other Obligor to apply the proceeds of the Notes as agreed herein; (c) the failure of any representation or warranty contained in this Agreement, in any Loan Document or in any other agreement, certificate, instrument or other document delivered pursuant to this Agreement or any Loan Document to be true and accurate in all material respects; and (d) any breach or non-performance by the Company of any covenant to be performed by it contained in this Agreement, in any Loan Document or in any other agreement, certificate, instrument or other document delivered pursuant to this Agreement or any Loan Document. A certificate of an officer of any Security Agent or any Holder as to any such claim, demand, liability, damage, loss, cost, charge or expense and containing reasonable details of the calculation shall be prima facie evidence of the amount of such claim, demand, liability, damage, loss, cost, charge or expense. Notwithstanding the foregoing provisions of this Section 4.11, the Company shall not be obligated to indemnify any Person under this Section 4.11 for any claim, demand, liability, damage, loss, cost, charge or expense to the extent that such claim, demand, liability, damage, loss, cost, charge or expense results from the gross negligence, fraud or wilful misconduct of such Person or the default by such Person in the performance of its material obligations under this Agreement.

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4.12

Maximum Rate of Interest

Notwithstanding anything herein or in any of the other Loan Documents to the contrary, in the event that any provision of this Agreement or any other Loan Documents would oblige the Company to make any payment of interest or other amount payable to the Holders in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by the Holders of interest at a criminal or prohibited rate (as such terms are construed under the Criminal Code (Canada) or any other Applicable Law), then notwithstanding such provision, such amount or rate shall be deemed to have been adjusted with the same effect as if adjusted at the Closing Date to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by law or so result in a receipt by the Holders of interest at a criminal or prohibited rate, such adjustment to be effected to the extent necessary in each case, as follows (a) by reducing any fees and other amounts which would constitute interest for the purposes of Section 347 of the Criminal Code (Canada) or any other Applicable Law; and (b) by reducing the Interest Rate.

Article 5

SECURITY

5.1

Security

As security for the due and punctual payment of all of the Obligations, the Company shall, and shall cause each other Obligor, to contemporaneously with the execution of this Agreement, deliver or cause to be delivered to the Security Agent, for and behalf of the Holders, in form and substance satisfactory the Majority Holders and their counsel (collectively, the " Security Agreements "):

(a)

the General Security Agreement;

(b)

the Blocked Account Agreement;

(c)

a Guarantee or Guarantee and Security Agreement from each related party, material Subsidiary and/or Affiliate of the Company other than the Guarantors, as deemed necessary by the Majority Holders, in their sole discretion, including, but not necessarily limited to, Arkados and Arkados Energy;

(d)

a Guarantee or Guarantee and Security Agreement from Terrence DeFranco, as deemed necessary by the Majority Holders, in their sole discretion, with a guaranty of not less than $200,000, in form and substance satisfactory to the Security Agent.

(e)

Certificates representing 100 percent of the issued and outstanding equity securities or membership interests, as the case may be, of Arkados and Arkados Energy, which certificate (or certificates) is (or are) endorsed and in blank; and

(f)

The Confessions of Judgment; and

(g)

all other documentation, consents and authorizations necessary in order to make valid and effective the aforementioned agreements.

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5.2

Further Assurances - Security

The Company shall take or cause to be taken such action and execute and deliver or cause to be executed and delivered to the Security Agent, for and on behalf of the Holders, such agreements, documents and instruments as the Majority Holders may request, and register, file or record the same (or a notice or financing statement in respect thereof) in all offices where such registration, filing or recording is, in the opinion of the Majority Holders or their counsel, necessary or advisable to constitute, perfect and maintain the Security in all jurisdictions reasonably required by the Majority Holders, in each case within a reasonable time after the request therefor, and in each case in form and substance satisfactory to the Majority Holders and their counsel. For greater certainty, to the extent that the Majority Holders consent to an amalgamation, consolidation, merger, winding-up or dissolution of an Obligor, the Obligor taking such action shall execute and deliver such agreements and other documents which the Majority Holders may reasonably require to ensure the continued validity, enforceability and effectiveness of the Security.

5.3

Security Effective Notwithstanding Date of Advance

The Security will be effective and the obligations under this Agreement and the other Loan Documents with respect thereto will be continuing, whether the monies hereby or thereby secured or any part thereof is advanced before or after or at the same time as the creation of any such Security or before or after or upon the date of execution of this Agreement. The Security will not be affected by any payments in respect of the Notes or any of the other Loan Documents, but will constitute continuing security to and in favour of the Security Agent, for and on behalf of the Holders, for the Obligations from time to time.

5.4

No Merger

The Security shall not merge in any other security. No judgment obtained by or on behalf of the Holders shall in any way affect any of the provisions of this Agreement, the other Loan Documents or the Security. For greater certainty, no judgment obtained by or on behalf of the Holders shall in any way affect the obligation of the Company to pay principal, interest or other amounts at the rates, times and in the manner provided in this Agreement.

5.5

Release of Security

Following due payment and performance in full of all Obligations of the Company and the other Obligors under this Agreement and the other Loan Documents, the Security Agent shall, at the request, cost and expense of the Company, release and discharge its rights and interests in the Property subject to the Security. In addition, if any Property of the Company or the other Obligors is disposed of as permitted by this Agreement and/or the Loan Documents, or is otherwise released from the Security at the direction or with the consent of the Majority Holders, at the request and expense of the Company (on satisfaction, or on being assured of concurrent satisfaction, of any condition to or obligation imposed with respect to such disposition), Security Agent shall discharge such Property from the Security at the Company's request in writing and at the cost and expense of the Company, and deliver and reassign to the Company any of such Property then in the possession of the Security Agent.

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Article 6

CONVERSION OF NOTES

6.1

Applicability of Article

Each Holder has the right, at such Holder’s option, to convert at any time the Tranche A Notes issued hereunder (in whole or in part) into Shares of the Company. The number of Shares into which a Tranche A Note may be converted shall be determined as follows:

(a)

The Principal Amount of such Note, together with accrued and unpaid interest and any other amount then payable under such Note (or such portion thereof as the Note Holder desires to convert), shall be converted into a number of shares at the conversion price of $0.80 per share, except as otherwise provided in this Section 6.1.

(b)

In the event the Company has not raised at least $500,000 in an offering of its common stock within 90 following Closing, the conversion price shall be $0.60 per share instead of the $0.80 per share set forth in Section 6.1(a).

(c)

In the event of an Event of Default that has not been cured at the time of conversion, the conversion price shall be the lesser of (i) the closing bid of the Company’s Shares on the day notice of conversion is given or (ii) 75 percent of the price of Shares in any registered offering, if notice of conversion is given when the registration statement for such offering is effective, instead of the $0.80 per share or $0.60 per share set forth in Section 6.1(a) or (b).

(d)

The number of shares determined under Section 6.1(a), (b), or (c) shall be adjusted to reflect (that is, to provide the same after-conversion percentage ownership as if the following event had not occurred)any (i) forward and reverse stock splits, stock dividends, and similar events which, while they change the number of shares outstanding, do not change the relative ownership of the stockholders; (ii) capital reorganizations, mergers, and similar events which cause changes in the common stock into which a convertible security may be converted or for which a warrant or option may be exercised; and (iii) issuances of additional shares of common or preferred stock, common or preferred stock equivalents, and options, warrants, or convertible securities convertible into common or preferred stock or common or preferred stock equivalents at prices below the conversion rate or exercise price of the convertible or exercisable security at a price below $1.60 per share. For these purposes, all such options, warrants, or convertible securities shall be deemed to be exercised or converted upon their issuance.

(e)

The Company represents and covenants to Security Holder and each Note Holder that (i) upon issuance, all the Shares issued to a Note Holder under this Section 6.1 shall be duly authorized, validly issued, fully paid and non-assessable. The Company will use its reasonable best efforts to cause the Shares to become registered under U.S. Securities Laws and freely tradable within one hundred and twenty (120) days of Closing.

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6.2

Manner of Exercise of Right to Convert

(a) The Holder of a Tranche A Note desiring to convert such Note, in whole or in part, into Shares of the Company shall surrender such Note to the Company at its principal office together with a written conversion notice (the " Notice of Conversion "), substantially in the form as set forth on Exhibit 2 hereto, stating (i) the principal amount of the outstanding Note to be converted into Shares of the Company and (ii) the Percentage Interest to be issued to such Holder upon conversion of such Note pursuant to Section 6.1. The date on which the Notice of Conversion is delivered to the Company is referred to herein as the " Date of Conversion ". Effective as of the Date of Conversion, such Holder shall be admitted as a shareholder of the Company and shall be issued such Percentage Interest as set forth in the applicable Notice of Conversion. Within three (3) Business Days after receipt by the Company of the Notice of Conversion form such Holder, the Company shall deliver to such Holder (i) any payment of interest to which such Holder is entitled in accordance with Section 6.2(c) and (ii) duly-authorized, validly-issued, fully-paid, and non-assessable Shares, issuance of which is covered by an effective registration statement.

(b) Upon a Holder of any Note exercising the right of conversion in respect of only a part of the Note and surrendering such Note to the Company in accordance with Section 6.2(a), the Company shall cancel the same and shall without charge forthwith certify and deliver to the Holder a new Note in a principal amount equal to the unconverted part of the principal amount of the Note so surrendered.

(c) The Holder of a Note surrendered for conversion in accordance with this Section 6.2 shall be entitled to receive accrued and unpaid interest in respect thereof up to the Interest Payment Date on or immediately preceding the Date of Conversion of such Notes, but there shall be no payment or adjustment by the Company on account of any interest accrued or accruing on such Notes from the latest Interest Payment Date until the Date of Conversion (unless the Date of Conversion occurs on the Interest Payment Date).

6.3

Cancellation of Converted Notes

Subject to the provisions of Section 6.2 as to Notes converted in part, all Notes converted in whole or in part under the provisions of this Article 6 shall be forthwith delivered to and cancelled by the Company and no Note shall be issued in substitution therefor.

Article 7

REPRESENTATIONS AND WARRANTIES

7.1

Representations and Warranties of the Company and the Guarantors

Except as disclosed on the Disclosure Schedule, each of the Company and the Guarantors represents and warrants to the Holders, acknowledging and confirming that the Holders are relying thereon without independent inquiry, that:

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(a)

Organization and Qualification . Each of the Company and Subsidiaries duly organized, validity existing and in good standing under the laws of its jurisdiction of organization. Each of the Company has the power and authority to carry on its business, own property, borrow monies and enter into agreements therefor, execute and deliver the Loan Documents to which it is a party and observe and perform the terms and provisions thereof. Each of Terrence DeFranco has the capacity to execute and deliver the Loan Documents to which he is a party and observe and perform the terms and provisions thereof.

(b)

Conflict With Other Instruments . The execution and delivery by each of the Company and Subsidiaries of the Loan Documents to which it is a party and the performance by each such Obligor of its obligations thereunder and compliance with the terms, conditions and provisions thereof, will not conflict with or result in a breach in any material respect of any of the terms, conditions or provisions of (a) its organizational documents (including any operating agreements) or by-laws, (b) any Applicable Law, (c) any resolution of the members or managers of the Obligors, or (d) any contractual restriction binding on or affecting it or its material properties. The execution and delivery by each of Terrence DeFranco of each of the Loan Documents to which he is a party and the performance by each such Obligor of his obligations thereunder and compliance with the terms, conditions and provisions thereof will not conflict with or result in a breach in any material respect of any of the terms, conditions or provisions of (a) any contractual restriction binding on or affecting him or his material properties; or (b) any Applicable Law.

(c)

Authorization . The execution and delivery of each of the Loan Documents by each of the Obligors which is a party thereto and the performance by each of the Obligors of their respective obligations thereunder have been duly authorized by all necessary limited liability company action on the part of each Obligor and any actions required under Applicable Law.

(d)

Governmental Consent . No permit, consent, approval or authorization of, or declaration to or filing with, any Governmental Authority is required in connection with the execution, delivery and performance by the Obligors of this Agreement and the other Loan Documents to which each is a party, or the consummation by the Obligors of any other transactions contemplated hereby or thereby, except (i) as may have been made or obtained prior to the date of this Agreement or obtained after the Closing Date in accordance with the terms of the Loan Documents, (ii) the filing of such notices as may be required under the U.S. Securities Act or any Securities Laws and (iii) such filings as may be required under applicable state U.S. Securities Laws, which will be timely filed within the applicable periods therefor.

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(e)

Execution and Binding Obligation . This Agreement and the other Loan Documents have been duly executed and delivered by each of the Obligors which is a party thereto and constitute legal, valid and binding obligations of each of the Obligors which is a party thereto, enforceable against it in accordance with their respective terms, subject only to any limitation under Applicable Laws relating to (i) bankruptcy, insolvency, reorganization, moratorium or creditors' rights generally; (ii) the fact that specific performance and injunctive relief may only be given at the discretion of the courts; and (iii) the equitable or statutory powers of the courts to stay proceedings before them and to stay the execution of judgments.

(f)

Offering . Subject to the accuracy of the Holders' representations and warranties in Section 7.3, the offer, sale and issuance of the Notes to be issued in conformity with the terms of this Agreement and the issuance of the Shares upon conversion of the Notes pursuant to Article 6 constitute transactions exempt from the registration requirements of Section 5 of the U.S. Securities Act.

(g)

Ownership of Property . Each of the Obligors has good and marketable title to all of its properties and assets, free and clear of all Liens, except for Permitted Liens. All Intellectual Property owned by each Obligor is described in Schedule 7.1(g) hereof.

(h)

Compliance with Laws . The Company and each other Obligor is in compliance with all Applicable Law, except for any non-compliance which could not reasonably be expected to have a Material Adverse Effect.

(i)

No Violation . Neither the Company nor any other Obligor has violated any law or any governmental regulation or requirement which violation has had or could reasonably be expected to have a Material Adverse Effect, and neither the Company nor any Obligor has received notice of any such violation.

(j)

No Default . No Default or Event of Default has occurred and is continuing.

(k)

Litigation, Etc . Except as disclosed in Schedule 7.1(k), there are no actions, suits, proceedings, trade disputes, orders, investigations or claims pending, taken or, to the Company's knowledge, threatened against or affecting the Company or any of its Subsidiaries or any Obligor (or to the Company's knowledge, pending or threatened against or affecting any of the managers, officers, members or employees of the Company, its Subsidiaries or any Obligor with respect to their respective businesses or proposed business activities), or pending or threatened by the Company, any of its Subsidiaries or any Obligor against any third party, at law or in equity, or before any arbitrator or by any Governmental Authority (including, without limitation, any actions, suit, proceedings or investigations with respect to the transactions contemplated by this Agreement). None of the Company, any Subsidiary of the Company or any other Obligor is subject to any judgment, order or decree of any court or other Governmental Authority.

(l)

Tax Liability . The Company and each other Obligor has filed all tax returns which are required to be filed and has paid all taxes, interest and penalties, if any, which have become due pursuant to such returns or pursuant to any assessment received by it, except any such assessment which is being contested in good faith by proper legal proceedings. Without limiting the foregoing all employee source deductions (including income taxes, employment insurance and pension plans) payroll taxes and workers' compensation dues are currently paid and up to date.

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(m)

Financial Statements . The annual audited financial statements of Company and Subsidiaries and the quarterly unaudited financial statements have been prepared in accordance with GAAP and fairly present in all material respects the financial condition of the Company and Subsidiaries as at such date and the results of its operations for the fiscal period then ended. Since the date of such financial statements, there has been no event which could reasonably be expected to have a Material Adverse Effect. Except as set forth in Schedule 7.1(m), none of the Company nor any other Subsidiary of the Company has on the date hereof any contingent liabilities, liabilities, liabilities for taxes, long-term commitments or unrealized or forward anticipated losses from any unfavorable commitments which have not been disclosed in such financial statements to the extent required by GAAP.

(n)

Subsidiaries . As at the date hereof, the Company has no Subsidiaries except as set forth in Schedule 7.1(n). Each such Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, possesses all requisite limited liability company power and authority and all material licenses, permits, registrations and authorizations necessary to own its properties and to carry on its businesses as now being conducted and as presently proposed to be conducted and is qualified to do business in every jurisdiction in which its ownership of property or the conduct of business requires it to qualify. All of the outstanding shares of the Company and shares or membership interests (as applicable) of Subsidiaries are validly issued, fully paid and nonassessable, and all such membership interests are owned by the Company free and clear of any Liens other than Permitted Liens and are not subject to any option or right to purchase any such membership interests. Except as set forth in Schedule 7.1(n), neither the Company nor any Subsidiary of the Company owns or holds the right to acquire any membership interests or shares of stock or any other security or interest in any other Person.

(o)

Absence of Undisclosed Liabilities . None of the Obligors has any material obligation or liability (whether accrued, absolute, contingent, unliquidated or otherwise, whether or not known to the Obligor, whether due or to become due and regardless of when asserted) arising out of transactions entered into at or prior to the closing of the transactions contemplated by this Agreement, or any action or inaction at or prior to the date hereof, or any state of facts existing at or prior to such date.

(p)

No Material Adverse Effect . No Material Adverse Effect has occurred and is continuing.

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(q)

Insurance . Neither the Company, any of its Subsidiaries, nor any other Obligor (other than Obligors that are individuals) is in material default with respect to its obligations under any insurance policy maintained by it, and neither the Company, any of its Subsidiaries, nor any other Obligor (other than Obligors that are individuals) has been denied coverage. The insurance coverage of the Company, its Subsidiaries and each other Obligor (other than Obligors that are individuals) is customary for prudent limited liability companies of similar size engaged in similar lines of business.

(r)

Employment and Labour .

(i)

Except for the employment agreement between the Company and Terrence DeFranco and Patrick Hassel, and neither the Company nor any Subsidiary is a party to any agreement, obligation or understanding providing for severance or termination payments to, or any employment agreement with, any director or officer, other than any common law obligations of reasonable notice of termination or pay in lieu thereof and any statutory obligations.

(ii)

Neither the Company nor any Subsidiary is subject to any collective bargaining agreements, and there are no current, pending or, to the knowledge of the Company, threatened strikes or lockouts at the Company or any Subsidiary.

(iii)

Neither the Company nor any Subsidiary is subject to any litigation, actual or, to the knowledge of the Company, threatened, relating to employment or termination of employment of employees or independent contractors.

(iv)

The Company and each Subsidiary has operated in accordance with all Applicable Laws with respect to employment and labour, including, but not limited to, employment and labour standards, occupational health and safety, employment equity, pay equity, workers' compensation, human rights and labour relations and there are no current, pending or, to the knowledge of the Company, threatened proceedings before any board or tribunal with respect to any of the above areas.

(v)

There are no outstanding stock appreciation rights, phantom equity or similar rights, agreements, arrangements or commitments based upon the book value, income or any other attribute of the Company or any Subsidiary.

(s)

Environmental and Safety Matters . To the Company's knowledge: (a) the Company and each Subsidiary has in all material respects complied with and are currently in compliance in all material respects with all Environmental Laws, and neither the Company nor its Subsidiaries have received any oral or written notice, report or information regarding any liabilities (whether accrued, absolute, contingent, unliquidated or otherwise) or any corrective, investigatory response or remedial obligations arising under Environmental Laws which relate to the Company or its Subsidiaries or any of its properties or facilities, and (b) without limiting the generality of the foregoing, the Company and its Subsidiaries have obtained and complied in all material respects, and are currently in compliance in all material respects, with all permits, licenses and other authorizations that may be required pursuant to any Environmental Laws for the occupancy of their properties or facilities or the operation of their businesses.

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(t)

Affiliated Transactions . Except a set forth on Schedule 7.1(t), no officer, manager, member or Affiliate of the Company or any of its Subsidiaries or any individual known to be related by blood, marriage or adoption to any such individual or any entity in which any such Person or individual owns any beneficial interest, is a party to any agreement, contract, commitment, transaction or arrangement with any the Company or any of its Subsidiaries or has any material interest in any material property used by the Company or any of its Subsidiaries.

(u)

Solvency . The Company, each Subsidiary and each other Obligor is on the date hereof, and after the incurrence of all Indebtedness hereunder and the other Loan Documents will be and will continue to be, Solvent.

7.2

Survival of Representations and Warranties

The representations and warranties herein set forth or contained in any certificates or notices delivered to the Holders pursuant hereto and shall continue in full force and effect (as of the date when made or deemed to be made) so long as any amounts are owing by the Company to the Holders hereunder unless waived by the Security on a case by case basis.

7.3

Representations and Warranties of the Holders

Each Holder, by purchasing a Note hereunder, represents and warrants to the Company that:

(a)

it is an "accredited investor" as defined under National Instrument 45-106 - Prospectus Exemptions or in section 73.3 of the Securities Act (Ontario) and SEC Regulation D Rule 501(a);

(b)

it is acquiring the Notes as principal and for its own account, not as nominee or agent, and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the U.S. Securities Act;

(c)

it has the corporate power and authority to execute and deliver the Loan Documents to which it is a party and observe and perform the terms and provisions thereof; and

(d)

the execution and delivery of the Loan Documents and the performance by it of its obligations thereunder and compliance with the terms, conditions and provisions thereof, will not conflict with or result in a breach in any material respect of any of the terms, conditions or provisions of (i) its constitution or organizational documents (including any shareholders' agreements) or by-laws, (ii) any Applicable Law, or (iii) any material judgment, injunction, determination or award which is binding on it.

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Article 8

COVENANTS

8.1

Affirmative Covenants

Except as otherwise consented to by the Majority Holders and for so long as any amounts are owing by the Company to the Holders hereunder, the Company shall, and shall cause each of the Guarantors, as applicable, to:

(a)

Punctual Payment . Pay or cause to be paid all Obligations falling due hereunder on the dates and in the manner specified herein;

(b)

Conduct of Business . Do or cause to be done all things necessary or desirable to maintain its limited liability company existence in its present jurisdiction of organization, to maintain its limited liability company power and capacity to own its Property, and to carry on the Business in a commercially reasonable manner;

(c)

Compliance with Applicable Law and Contracts . Comply in all material respects with: (i) the requirements of all Applicable Law and (ii) all obligations which, if contravened, would give rise to a Lien over any of its property ranking in priority to the Security;

(d)

Accounting Methods and Financial Records . Maintain a system of accounting which is established and administered in accordance with GAAP, keep adequate records and books of account in which accurate and complete entries shall be made in accordance with GAAP reflecting all transactions required to be reflected by GAAP and keep accurate and complete records of any property owned by it;

(e)

Maintenance of Property . Maintain all of its Property used in the Business in good repair, working order and condition (ordinary wear and tear excepted) and from time to time make or cause to be made all necessary and appropriate repairs, renewals, replacements, additions and improvements thereto;

(f)

Insurance . Maintain insurance on its Property with financially sound and reputable insurance companies or associations including all-risk property insurance, comprehensive general liability insurance, errors and omissions insurance and business interruption insurance in amounts and against risks that are determined to be appropriate by the Company and the Obligors acting prudently;

(g)

Security . Take such action from time to time as shall be necessary to ensure that the Security at all times constitutes a perfected Lien over the Property, subject only to Permitted Liens;

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(h)

Consents and Approvals . Upon request by the Security Agent (who may in its discretion and shall, if instructed in writing by the Majority Holders, make such request), take such steps that are commercially reasonable to obtain any approvals or consents required now or in the future to permit (i) any asset over which the Security Agent, for and on behalf of the Holders, has or may have a security interest to be transferable to the Security Agent and by it to any other Person free of any restrictions in transfer; (ii) to permit the exercise of the conversion rights set forth in Article 6; or (iii) to permit the Company and the other Obligors to perform their obligations under this Agreement and the other Loan Documents.

(i)

Inspections . Permit the Security Agent (who may in its discretion and shall, if instructed in writing by the Majority Holders, take such action) and its authorized employees, representatives and agents, upon giving at least two Business Days' prior notice, at the expense of the Company, provided that such inspections shall not take place more than two (2) times per calendar year in the absence of an Event of Default:

(i)

to visit and inspect its Property during normal business hours;

(ii)

to inspect and make extracts from and copies of its books and records; and

(iii)

to appoint an observer to participate and have access to the Company's board of manager's meetings and to discuss with senior management of the Company and each other Obligor, as may be reasonably designated by the Security Agent (who may in its discretion and shall, if instructed in writing by the Majority Holders, make such designation), and with its auditors, its business, property and assets, financial condition and prospects.

(j)

Payment of Taxes and Claims . On a timely basis, comply with the following: file or cause to be filed all federal, provincial and local returns, filings, elections and reports which are required to be filed by it in respect of all Taxes; and shall pay or cause to be paid all such Taxes (and any interest and penalties in respect thereof) as may be required by Applicable Law and in accordance with any assessment or demand for payment received by the Company or any other Obligor as and when such Taxes become due and payable and provide evidence of payment if so requested by the Security Agent (who may in its discretion and shall, if instructed in writing by the Majority Holders, make such request), except when and so long as the validity of any such Taxes is in good faith being diligently contested by the Company or an Obligor; and shall from time to time withhold or cause to be withheld and remitted all amounts required to be withheld (including without limitation, income tax, withholding taxes on payments to non-residents, pension plan and employment insurance) from all payments made to officers and employees or to all non-residents and to all other applicable Persons and shall pay or cause to be paid these amounts, together with any interest and penalties due, to the appropriate authority on a timely basis and in the form required by Applicable Law.

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(k)

Use of Proceeds . Use the proceeds of the Notes shall only be used in connection with the repayment of the Bank Indebtedness.

(l)

Registration of Notes . On or before December 31, 2017, unless the Shares are registered and freely tradable, the Company shall take requisite actions, including registration, if necessary, so that the Notes may be traded on a market facility on which public quotations in common use are widely available.

(m)

Equity Securities of Arkados and Arkados Energy . Arkados will cause Arkados and Arkados Energy not to issue any equity securities, except as approved by the Security Agent, unless certificated stock for any such equity securities are delivered to Security Agent and are endorsed in blank.

(n)

Confessions of Judgement . Arkados will deliver to the Security Agent notarized affidavits of confession of judgment executed by each of Arkados and Arkados Energy satisfying the requirements of New York Civil Practice Law and Rules § 3218 (Judgment by confession), in form and substance satisfactory to Security Agent, in its sole discretion, three months before the third anniversary of the execution of the affidavits of confession of judgment described in Section 5.1(f), if any Notes are outstanding on such date.

(o)

Additional Guarantors . At the request of the Majority Holders, the Company shall promptly (and in any case no later than 10 Business Days after such request) cause to be delivered to the Security Agent, for and on behalf of the Holders, a Guarantee or Guarantee and Security Agreement from each material Subsidiary deemed necessary by the Majority Holders, in their sole discretion.

(p)

Bank Indebtedness . As soon as practicable, and in any event no later than two (2) Business Days, following the Closing Date, the Company shall:

(i)

apply the proceeds from the sale of the Initial Notes hereunder to the purchase of the assets of SolBright pursuant to an agreement requiring SolBright to discharge the Bank Indebtedness and deliver or cause to be delivered to the Security Agent the following:

(A)

a release executed by Wells Fargo Bank and confirming that the security granted in respect of the Bank Indebtedness is of no force and effect; and

(B)

within 5 days, evidence of the discharge of all UCC financing statements registered against SolBright in respect of the Bank Indebtedness;

(ii)

execute and deliver to the Security Agent the Company Pledge Agreement;

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(iii)

deliver to the Security Agent certificates evidencing the Company's 100-percent ownership of the securities of each of Subsidiaries along with executed and undated transfer powers in respect thereof;

(iv)

such other documents as may be required by the Security Agent (in its discretion except if instructed by the Majority Holders).

(q)

Field Examiner . Within six weeks of Closing, Company shall provide (or cause to be provided) reasonable access to field examiner, engaged by Security Agent, to books and records of Company and its Subsidiaries to enable the Security Agent and field examiner to confirm Company’s compliance with this Agreement, including, but not limited to, its covenant regarding the use of proceeds of the Notes, completion of the acquisition of substantially all of the assets of SolBright and satisfaction of the Bank Indebtedness, blocked accounts and borrowing base calculations with collateral coverage for the Notes, the equity raise required by Section 3.1(o), and other closing conditions and covenants, and the cost of such field work shall be borne by Company.

(r)

Financial Covenants . For the first fiscal quarter of the Company beginning on or after the Closing Date, and for each fiscal quarter of the Company thereafter, the Company shall deliver to the Security Agent, within 10 business days following the end of the fiscal quarter, evidence satisfactory to the Security Agent indicated all of the following:

(i)

The Company is Cash Flow Positive or has Close Cash Flow Visibility. For purposes of this Section 8.1(r), the Company shall be considered Cash Flow Positive for a fiscal quarter when its operating income less capital expenditures less working capital is greater than $0, and the Company shall be considered to have Close Cash Flow Visibility if it appears that the Company will become Cash Flow Positive in the following fiscal quarter.

(ii)

The Company has revenues of $2 million and net cash flow of at least $50,000 for the quarter ending May 31, 2017 and $6 million and $500,000 respectively for each quarter thereafter.

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The Company shall use its reasonable best efforts to file, within 75 days of the Closing Date, a registration statement with the Securities and Exchange Commission, which registration statement will cover the Warrants and the Shares into which the Notes may be converted, and such registration statement shall be effective within 120 days of the Closing Date and remain effective until the earlier of (i) the exercise of the Warrants and the conversion of the Notes or (ii) the full satisfaction of all of the Notes. Notwithstanding the foregoing obligations, if the Company furnishes to the Security Agent after such request for registration, a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, then the Company shall have the right to defer taking action with respect to such filing for a period of not more than one hundred fifty (150) days after the request of Security Agent is given. The Company shall pay to Security Agent, on behalf of the Holders, 1% of the outstanding principal amount of the Notes for every fifteen (15) beginning 120 days after the Closing Date, that the Company does not have an effective registration covering the Shares into which the Notes may be converted, the Shares purchased by the Security Agent for and on behalf of the Holders, and the Shares that may be purchased pursuant to the Warrants.

(s)

The Company shall (i) raise at least $500,000 cash in additional equity capital with ninety (90) days of the Closing Date, (ii) shall raise at least $5,000,000 cash in additional equity capital within six months of the Closing Date (which includes any amount raised under Clause (i)), and (iii) shall raise at least $14,000,000 cash in additional equity capital within nine months of Closing Date (which includes any amounts raised under Clauses (i) and (ii)).

8.2

Reporting Requirements

The Company shall, and shall cause, as applicable, each of the Obligors to provide to the Security Agent (who shall promptly provide to each Holder):

(a)

Financial Information . The Company will comply with financial reporting requirements under U.S. Securities Laws. Copies of all financial information filed with any Securities Commission will be provided to Security Agent on the same day such information is filed.

(b)

As soon as practicable and in any event within 5 days of the end of each month, the Officer's Certificate (in the form specified in Schedule 8.2(a) attached hereto) including the following reports as applicable:

(i)

Monthly borrowing base certificate (in the form specified in Appendix A of Schedule 8.2(a)) accompanied by a monthly sales and cash flow reports as compared to the Business Plan, new equity investment in the Company in such month and summaries of account receivables and payables aged by due date and list of contingent liabilities;

(ii)

As soon as available and in any event no later than the end of each Fiscal Year of the Company (A) an annual Business Plan in respect of the Company and its Subsidiaries, on a consolidated basis, approved by the board of managers of the Company for the current Fiscal Year, in form reasonably satisfactory to the Security Agent (in its discretion except if instructed by the Majority Holders) and (B) forecasts prepared by management of the Company, in form reasonably satisfactory to the Security Agent (in its discretion except if instructed by the Majority Holders), consisting of balance sheets, income statements and statements of cash flows for the next two Fiscal Years, prepared on a consolidated basis.

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(c)

Regulatory Matters . Copies of all information filed with any Securities Commission will be provided to Security Agent on the same day such information is filed with any Securities Commission. Contemporaneously with the receipt thereof by the Company, copies of any material correspondence from any Securities Commission, including any correspondence relating to any examination or investigation relating to the Company.

(d)

Notice of Default . As soon as practicable after it becomes aware of the same, the Company shall provide to the Security Agent (who shall promptly provide to each Holder), notice of: (i) any Default or Event of Default; and (ii) any default under, or the occurrence or non-occurrence of any event which, upon notice, lapse of time or both, would constitute any default under, any material contract or any material lease of real property to which the Company or any Obligor is a party; in each case including the details thereof and the action proposed to be taken with respect thereto.

(e)

Notice of Litigation . As soon as practicable after it becomes aware of the same, the Company shall provide to the Security Agent (who shall promptly provide to each Holder), any notices of the commencement of, or threatened commencement of, any action, proceeding, arbitration or investigation (other than claims that are frivolous or vexatious and without merit) against or in any other way relating adversely to any of the Obligors or any of their respective properties, assets, permits or businesses, which if determined adversely against any of them, would expose any number of them to present or future liability in excess of $10,000, determined in the aggregate. The Company shall also promptly, upon the request of the Security Agent (in its discretion except if instructed by the Majority Holders), provide to the Security Agent (who shall promptly provide to each Holder), status updates relating to all such actions or proceedings.

(f)

Material Adverse Effect . As soon as practicable after it becomes aware of the same, the Company shall provide to the Security Agent (who shall promptly provide to each Holder), notice of any development which has had or may reasonably be expected to have a Material Adverse Effect.

(g)

New Subsidiaries . In the event a Subsidiary of the Company or any other Obligor is created or acquired after the date hereof, immediately provide notice thereof to the Holders, and, promptly upon request by the Majority Holders or the Security Agent on their behalf (and no later than 10 Business Days after such request), such new Subsidiary shall (i) become a Guarantor hereunder and (ii) deliver to the Security Agent, for and on behalf of the Holders, a Guarantee or Guarantee and Security Agreement.

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(h)

Notice of Change of Name . The Company shall provide to the Security Agent (who shall promptly provide to each Holder) at least 15 days' prior written notice of any change of name of the Company or any other Obligor and promptly take other steps, if any, as the Security Agent (in its discretion except if instructed by the Majority Holders), reasonably requests to permit it to maintain the perfection of the Security with respect to the change in name.

(i)

Notice of Change of Chief Executive Officer . The Company shall provide to the Security Agent (who shall promptly provide to each Holder) 90 days prior written notice of any change to the Company's or any other Obligor's jurisdiction to a jurisdiction where the Security given by it, or the Company or such Obligor, as applicable, has not been registered, and promptly take other steps, if any, as the Security Agent (in its discretion except if instructed by the Majority Holders) reasonably requests to perfect the Security with respect to the change in Relevant Jurisdiction or provide such additional Lien in favour of the Security Agent, for and on behalf of the Holders, as the case may be; provided that, none of the Company or any other Obligor may establish any place of business or maintain any material personal property outside of Canada or the United States of America.

8.3

Negative Covenants

Except as otherwise consented to by the Majority Holders and for so long as any amounts are owing by the Company to the Holders hereunder, the Company may not, and may not permit any Obligor to:

(a)

Change of Business . Make any material change in the Business (including, without limitation, engaging directly or indirectly in any business activity or acquiring any Property, in each case unrelated to or unnecessary for the conduct of the Business relative to such Person.

(b)

Disposition of Assets . Sell, transfer or otherwise dispose of any of its Property, whether now owned or hereafter acquired, except that each of the Obligors may:

(i)

sell in the normal course of its business, for the purpose of carrying on the same, for fair value, in accordance with customary trade terms, any Property that would reasonably be considered to be the subject matter of sales by it in the normal course of its business for the purpose of carrying on the same;

(ii)

sell, transfer or otherwise dispose of any Property that is worn out or obsolete or of no material value;

(iii)

sell, transfer or otherwise dispose of any equipment which has been or will be substantially concurrently replaced, all in the ordinary course of business and on commercially reasonable terms; or

(iv)

with the prior written consent of the Security Agent, sell the non-core business assets.

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(c)

Acquisitions . Make any Acquisition, other than Acquisitions with an aggregate acquisition cost of less than $100,000 that are in accordance with the Business Plan; provided that (i) no Default or Event of Default has occurred and (ii) any such Acquisition shall not be permitted if it is reasonably likely that such Acquisition could have an adverse effect on the financial condition of the Company or any of the Obligors or on the value of any of the Property which is subject to the Security or (iii) as may be approved in advance by the Security Agent (in its discretion except if instructed by the Majority Holders).

(d)

Investments . Make any Investments other than (i) in the case of Obligors, in accordance with the Business Plan, (ii) an Investment by an Obligor in another Obligor, (iii) in cash and Cash Equivalents, or (iv) as may be approved in advance by the Security Agent (in its discretion except if instructed by the Majority Holders); provided that , in each case, (x) no Default or Event of Default has occurred and (y) any such Investment shall not be permitted if it is reasonably likely that such Investment could have an adverse effect on the financial condition of any of the Obligors or on the value of any of the Property which is subject to the Security.

(e)

Amalgamations, Reorganization, etc. Enter into any amalgamation or consolidation or merger or liquidate, wind-up or dissolve itself (or permit any liquidation, winding-up or dissolution or any proceedings therefor) or continue itself under the laws of any other statute or jurisdiction, except that, subject to the Company and the Obligors taking such action, and executing and delivering to the Security Agent, for and on behalf of the Holders, such agreements and other documents as the Security Agent (in its discretion except if instructed by the Majority Holders) may reasonably require to assure the continued validity, enforceability and effectiveness of the Security and the covenants, agreements and obligations of the Company under the Loan Documents, and provided that there does not then exist a Default or an Event of Default hereunder and such action would not result in the occurrence of a Default or an Event of Default hereunder, any wholly-owned Subsidiary may be amalgamated or consolidated or merged or liquidated, wound-up or dissolved with or into (i) the Company, provided that the Company is the continuing corporation or (ii) any one or more other wholly-owned Subsidiaries.

(f)

Non-Arm's Length Transactions . Other than as disclosed to the Security Agent or any Holders prior to the date of this Agreement, or as may be consented to by the Security Agent (in its discretion except if instructed by the Majority Holders), enter into any transaction, including the purchase, sale or exchange of any Property or the rendering of any services, with any of its members or with any of its Affiliates, or with any of its or their managers, directors or officers, as applicable, or enter into, assume or permit to exist any employment, consulting or analogous agreement or arrangement with any such member or Affiliate or with any of its managers, directors or officers, as applicable, except a transaction or agreement or arrangement which is in the ordinary course of business of the Company or such Subsidiary and which is upon fair and reasonable terms not less favourable to the Company or such Subsidiary than it would obtain in a comparable arm's-length transaction (for greater certainty, this Section 8.3(f) shall not operate to prohibit the issuance of the Notes).

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(g)

Bankruptcy, Insolvency, Etc. Take or institute any proceedings for the winding up, liquidation, dissolution or commencement of bankruptcy or insolvency proceedings with respect to the Company or a Subsidiary.

(h)

Lien . Create, incur, assume or suffer to exist any Lien on an any assets of any Obligor, other than Permitted Liens.

(i)

Indebtedness . Create, incur, assume or permit to remain outstanding, or otherwise become directly or indirectly liable upon or in respect of, Indebtedness other than Permitted Indebtedness.

(j)

Distributions and Dividends . Declare or pay or permit any Distribution, other than:

(i)

bonuses or other compensation arrangements (including management fees and routine employee benefits) paid to employees, managers or officers of an Obligor in the ordinary course of business, consistent with past compensation arrangements and which are commercially reasonable and are consistent with arrangements that have been approved by the board of managers of such Obligor, as applicable;

(ii)

routine and reasonable fees paid to managers of an Obligor; and

(iii)

any such dividends, capital payments, redemptions, bonuses or distributions paid by an Obligor to an Obligor.

(k)

Accounting Policy . Make any change to the accounting policies and practices of the Company or any other Obligor except as required by GAAP.

(l)

Organizational Documents . Amend, alter, or repeal any provision of the certificate of formation, operating agreement or any other organizational document of the Company or any other Obligor, or alter or change the rights, preferences or privileges of any membership interests therein.

8.4

Environmental Compliance and Indemnity

The Company shall, and shall cause each of its Subsidiaries to, carry on its Business, and maintain its Property (in the case of non-owned real property, to the extent within its control) in accordance with Environmental Laws and promptly remedy any compliance issues.

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If there is any Release of Contaminants in connection with the Business or Property of the Company or any of its Subsidiaries, the Company shall indemnify and save harmless the Holders and the Security Agent, their directors, officers, employees and agents for any and all losses, damages, fines, costs and other amounts (including amounts spent preparing any necessary environmental assessment or other reports, or defending any lawsuits) that result from such Release. Upon the request of the Majority Holders or the Security Agent, the Company will defend any lawsuits, investigations or prosecutions brought against the Holders and/or the Security Agent or any of their/its directors, officers, employees and agents in connection with any Release (except to the extent such liabilities (i) are incurred solely following enforcement by the Holders and/or the Security Agent or following the Holders and/or the Security Agent having become the successor-in-interest to the Company or any of its Subsidiaries and (ii) are attributable solely to the gross negligence or willful misconduct of the indemnitee). The Company's obligation under this Section 8.4 shall continue even after all Obligations have been repaid in full and the Notes have been cancelled

The Company shall provide to the Security Agent (who shall promptly provide to each Holder) such information and reports relating to environmental matters as the Security Agent (in its discretion except if instructed by the Majority Holders) may reasonably request from time to time and that the Company has access to or can readily and reasonably gain access to.

8.5

Entitled to Perform Covenants

If the Company or any other Obligor fails to perform any covenant contained in Section 8.1, or in any other provision hereof or of any of the other Loan Documents or breaches Section 8.3, the Majority Holders or the Security Agent may (but shall have no obligation to) perform, without thereby waiving any rights to enforce this Agreement or the other Loan Documents, any such covenant capable of being performed by it and if any such covenant requires the payment of money the Majority Holders or the Security Agent may (but shall have no obligation to) make such payments. All sums so expended by the Majority Holders or the Security Agent shall be deemed to form part of the Obligations, shall bear interest at the same rate as the Principal Amount following the occurrence of an Event of Default and shall be payable by the Company on demand.

Article 9

EVENTS OF DEFAULT AND REMEDIES

9.1

Events of Default

The occurrence of any of the following events constitutes an Event of Default:

(a)

Failure to Make Payments . If the Company shall fail to pay, in accordance with the terms of this Agreement, any Principal Amount or any interest payable in respect thereof on the date such sum is due or any other fee, cost, charge or other sum due under this Agreement or any other Loan Document;

(b)

Negative Covenants . If the Company defaults in the performance or observance of any negative covenant contained herein, and such default is not remedied within 5 business days of the occurrence thereof; or

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(c)

Other Covenants . If the Company or any Obligor defaults in the performance or observance of any material term, condition, covenant, or obligation contained in any Loan Document, other than terms, conditions, covenants or obligations referred in Section 9.1(a) or (b), and such default is not remedied within 15 days of the occurrence thereof; or

(d)

Default under other Indebtedness . If the Company or any of its Subsidiaries has failed to pay any amount of Indebtedness (other than Indebtedness incurred hereunder) exceeding an aggregate of $25,000 (or the equivalent amount in any other currency) when due and payable by the Company or any of its Subsidiaries, and such default continues after the grace period, if any, specified in the instrument or agreement related to such Indebtedness, or any amount or amounts exceeding an aggregate of $25,000 (or the equivalent amount in any other currency) has been declared or is capable of being declared, to be due and payable by the Company or any of its Subsidiaries whether on or prior to the stated maturity date thereof or on or prior to the regularly scheduled date for payment thereof; or

(e)

Representations and Warranties . If any representation or warranty made by the Company or any Obligor herein or in any other Loan Document is found to be incorrect in any material respect on the date as of which it was made; or

(f)

Loan Documents . If any of this Agreement, the Security Documents, the other Loan Documents or any part thereof, at any time after its respective execution and delivery and for any reason, ceases in any way to be in full force and effect as against the Company or any other Obligor or to be a legal, valid, binding and enforceable obligation of the Company or any other Obligor or any other Person that is a party to such document, or if the Security or any part of the Security, at any time after its execution and delivery and for any reason, ceases in any way to constitute a Lien of the nature and priority specified in or contemplated by this Agreement, the Security Documents or the other Loan Documents (subject to Permitted Liens), or if it is or becomes unlawful for the Company or any other Obligor to perform or comply with any or all of its obligations under any of this Agreement, the Security Documents or the other Loan Documents, or if the validity or enforceability of any of this Agreement, the Security Documents or the other Loan Documents is disputed in any manner by the Company or any other Obligor or any other party thereto; or

(g)

Voluntary Insolvency Actions . If the Company or any other Obligor institutes proceedings for its winding up, liquidation or dissolution, or takes action to become a voluntary bankrupt, or consents to the filing of a bankruptcy proceeding against it, or files a proposal, a notice of intention to make a proposal, a petition or answer or consent seeking reorganization, readjustment, arrangement, composition or similar relief under any Bankruptcy Law or any other similar Applicable Law or consents to the filing of any such petition, or consents to the appointment of a receiver, liquidator, trustee or assignee in bankruptcy or insolvency of all or any part of the property of the Company or any other Obligor or makes an assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due or commits any other act of bankruptcy, or suspends or threatens to suspend transaction of its usual business, or any action is taken by the Company or any other Obligor in furtherance of any of the aforesaid; or

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(h)

Involuntary Insolvency Proceedings . If proceedings are instituted in any court of competent jurisdiction for the winding up, liquidation or dissolution of the Company or any other Obligor or for any reorganization, readjustment, arrangement, composition or similar relief with respect to the Company or any other Obligor under any bankruptcy law or any other applicable insolvency law including any proceeding, proposal, notice of intention to make a proposal, order or petition under Bankruptcy Law, or for the appointment of a receiver, liquidator, trustee or assignee in bankruptcy or insolvency of all or any part of the property of the Company or any other Obligor, and such proceeding has not been dismissed within 30 days from and including the day on which it was commenced; or

(i)

Appointment of Receiver . If a receiver, manager, receiver and manager, trustee, custodian, liquidator or other similar official is appointed in respect of the Company or any other Obligor or any part of the property of the Company or any other Obligor and, in the case of any such involuntary appointment, at any time thereafter and the effect of such appointment has not been stayed within 45 days from and including the day of such appointment; or

(j)

Judgments . If any judgment of a court of competent jurisdiction has been granted or issued against the Company or any other Obligor (i) in an individual case an amount in excess of $25,000 (other than a judgment covered by insurance as to which the insurance company has not disclaimed or reserved the right to disclaim coverage) or (ii) in the aggregate at any time outstanding amount in excess of $25,000 (or in either case, the equivalent amount in any other currency) (other than judgment(s) covered by insurance as to which the insurance company has not disclaimed or reserved the right to disclaim coverage), and such judgment(s) continues unsatisfied and in effect for a period of more than 30 days from the date of its entry and are not stayed or suspended, by pendency of an appeal or otherwise, during such period; or

(k)

Encumbrances . If an encumbrancer takes possession of any material part of the Property of the Company or any other Obligor or if a distress or execution or any similar process is levied or enforced against any material part of the Property of the Company or any other Obligor; or

(l)

Cease to Carry on Business . If the Company or any other Obligor ceases or threatens to cease to carry on all or a material part of its business in the ordinary course; or

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(m)

Material Adverse Change . If any event occurs or any circumstance or condition exists which in any case results in a Material Adverse Effect; or

(n)

Change of Control . If, after the date of this Agreement, there is a Change of Control or an acquisition of Control of the Company except with the written consent of the Majority Holders.

9.2

Remedies Upon Default

Notwithstanding any other term of this Agreement or any other Loan Document, upon the occurrence and during the continuance of any Event of Default and the passage of five business days following the Security Holder giving notice of such Event of Default to the Company, the Security Agent (in its discretion except if instructed by the Majority Holders) or the Majority Holders may (i) declare all Obligations to be immediately due and payable and the same shall forthwith become immediately due and payable by the Company to the Holders on demand, in each case, without presentment, protest or further notice, all of which are hereby waived by the Company, (ii) exercise all other rights given to the Security Agent and Holders by this Agreement, including Section 9.7, and applicable law.

In the event that an Event of Default has occurred, the Majority Holders may at any time waive such Event of Default or rescind any action taken pursuant to Section 9.2.

9.3

Distributions

All distributions under or in respect of any of the Loan Documents shall be held by the Security Agent or the Holders on account of the Obligations without prejudice to any claim by the Holders for any deficiency after such distributions are received by the Holders and the Company shall remain liable for any such deficiency. All such distributions may be applied to such part of the Obligations as the Majority Holders may see fit in their sole discretion, and the Majority Holders may at any time change any appropriation of any such distributions or other moneys received by them and reapply the same on any other part of the Obligations as the Majority Holders may see fit, in their sole discretion, notwithstanding any previous application.

9.4

Notice of Events of Default

If an Event of Default occurs and is continuing the Security Agent will, within 30 days after it becomes aware of the occurrence of such Event of Default, give notice of such Event of Default to the Company and the Holders in the manner provided in Section 11.3 unless the default has been waived pursuant to section 9.6.

Where notice of the occurrence of an Event of Default has been given and the Event of Default is thereafter cured, notice that the Event of Default is no longer continuing will be given by the Security Agent to the Holders in the manner provided in 11.3 within a reasonable time not exceeding 30 days after the Security Agent becomes aware that the Event of Default has been cured.

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9.5

Acceleration

If an Event of Default occurs, the Security Agent (in its discretion except if instructed by the Majority Holders) may declare the Principal Amount of the Notes then outstanding, all accrued and unpaid interest owing in respect thereof and all other monies payable hereunder to be due and payable and such principal and interest shall immediately become due and payable by the Company to the Holders on demand, provided that the Security Agent and the Holders have provided the requisite notices to the Company of such default under this Agreement, and the Company shall on such demand forthwith pay to the Holders the Principal Amount of and accrued and unpaid interest on amounts in default on such Notes and all other amounts payable hereunder together with subsequent interest thereon at the applicable Interest Rate from the date of the said declaration until payment is received by the Holders, such subsequent interest to be payable at the times and places and in the monies mentioned in and according to the tenor of the Notes. Such payment when made will be deemed to have been made in discharge of the Company's obligations hereunder and any monies so received by the Security Agent or the Holders will be applied as herein provided.

9.6

Waiver of Default

If an Event of Default occurs other than by default in payment of any Principal Amount on the Maturity Date, the Majority Holders shall have the power by requisition in writing to instruct the Security Agent to waive the default or to cancel any declaration made by the Security Agent made pursuant to Section 9.5 and the Security Agent shall then waive the default or cancel the declaration upon such terms and conditions as such Holders prescribe; and the Security Agent (in its discretion except if instructed by the Majority Holders) shall, so long as it has not become bound to institute any proceedings hereunder, have the power, subject to Applicable Law, to waive any default arising hereunder except in payment of any Principal Amount payable on the Maturity Date if, in the Security Agent's opinion, such default is not adverse to the interests of the Holders or has been cured or adequate satisfaction has been made, and in such event to cancel any such declaration made by the Security Agent in the exercise of its discretion, upon such terms and conditions as the Security Agent may deem advisable; provided that no act or omission either of the Security Agent or of the Holders in the premises will extend to or be taken in any manner whatsoever affect any subsequent default or the rights resulting therefrom.

9.7

Remedies of Security Agent

If the security interests created by this Agreement become enforceable following the expiration of all applicable notice and cure periods set forth herein, the Security Agent may, and shall upon receipt of written instruction of the Super-Majority Holders directing it to do so, enforce its rights by any one or more of the following remedies:

(a)

by taking possession of the Collateral or any part of it and collecting, demanding, suing, enforcing, recovering, receiving and getting in the Collateral;

(b)

by licensing, selling or granting a security interest in all as part of the Collateral, whether or not it has taken possession of it;

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(c)

by filing the Confessions of Judgment in the Supreme Court of the State of New York for New York County;

(d)

by proceedings in any court of competent jurisdiction for the appointment of a receiver or receiver-manager of all or any part of the Collateral;

(e)

by selling, leasing or otherwise disposing of all or any part of the Collateral, whether by public or private sale or lease or otherwise, in such manner, and at such price as can be reasonably obtained therefor and on such terms as to credit and with such conditions of sale and stipulations as to title or conveyance or evidence of title or otherwise as the Security Agent may deem reasonable, provided that if any sale is on credit the Company will not be entitled to be credited with the proceeds of any such sale, lease or other disposition until the monies therefor are actually received;

(f)

by filing of proofs of claim and other documents to establish its claim in any proceeding or proceedings relating to the Company;

(g)

by appointing by instrument in writing a receiver, receiver-manager or receiver and manager (the person so appointed is hereinafter called the " Receiver ") of the Collateral, with or without bond as the Security Agent may determine, and from time to time in its absolute discretion remove such Receiver and appoint another in its stead by appointment by instrument in writing of a receiver or receiver-manager of all or any part of the Collateral;

(h)

by entering upon any premises of the Company and taking possession of the Collateral with power to exclude the Company, its agents and its servants therefrom, without becoming liable as a mortgagee in possession and the Company hereby grants to the Holders and the Security Agent a license to occupy any premises of the Company for the purpose of storage of the Collateral;

(i)

by retaining any of the Collateral in satisfaction of all or part of the Obligations provided that the value of any Collateral so retained does not exceed the amount of the Obligations so satisfied; and

(j)

by any other remedy or proceeding authorized or permitted by this Agreement or by law or equity.

All action taken under this Section 9.7 will be taken on behalf of and for the equal benefit of all Holders.

The provisions of Section 9.8(e) will apply mutatis mutandis , to a sale or lease of any of the Collateral by the Security Agent pursuant to Section 9.7(b).

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No purchaser at any sale purporting to be made in pursuance of the powers set forth in Section 9.7(b) will be bound to see or inquire whether any default has been made or continues or whether any notice required hereunder has been given or as to the necessity or expediency of the stipulations subject to which such sale has been made or otherwise as to the propriety of such sale, or regularity of proceedings or be affected by notice that such default has been made or continues or notice given as aforesaid, or that the sale is otherwise unnecessary, improper or irregular; and notwithstanding any impropriety or irregularity or notice thereof to such purchaser, the sale as regards such purchaser will be deemed to be within the aforesaid power and be valid accordingly and the remedy, if any, of the Company in respect of any impropriety or irregularity whatsoever in any such sale will be in damages only.

9.8

Receiver or Receiver Manager

If the Security Agent appoints a Receiver pursuant to Section 9.7(f), any such Receiver will have the following powers:

(a)

to take possession of the Collateral or any part thereof, and to collect and get in the same and for that purpose to enter into and upon any lands, tenements, buildings, houses and premises wheresoever and whatsoever and to do any act and take any proceedings in the name of the Company, or otherwise, as the Receiver deems necessary;

(b)

to carry on or concur in carrying on the business of the Company (including, without limitation, the payment of the obligations of the Company whether or not they are due and the cancellation or amendment of any contracts between the Company and any other person) and the employment and discharge of such agents, managers, clerks, accountants, employees, contractors, workers and others upon such terms and with such salaries, wages or remuneration as the Receiver thinks proper;

(c)

to repair and keep in repair the Collateral or any part or parts thereof and to do all necessary acts and things for the protection of the Collateral;

(d)

to make any arrangement or compromise which he thinks expedient in the interest of the Security Agent or the Company and to assent to any modification or change in or omission from the provisions of this Agreement;

(e)

to exchange any part or parts of the Collateral for any other property suitable for the purposes of the Company upon such terms as may seem expedient and either with or without payment or exchange of money or equality of exchange or otherwise;

(f)

to raise on the security of the Collateral or any part or parts thereof, by mortgage, charge or otherwise any sum of money required for the repair, insurance or protection thereof, or any other purposes herein mentioned, or as may be required to pay off or discharge any lien, charge or encumbrance upon the Collateral or any part thereof, which would or might have priority over the security interests hereby created; and

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(g)

whether or not the Receiver has taken possession, to sell or lease or concur in the sale or leasing of any of the Collateral or any part or parts thereof after giving the Company not less than 20 days written notice of his intention to sell or lease and to carry any such sale or lease into effect by conveying, transferring or assigning in the name of or on behalf of the Company or otherwise; and any such sale or lease may be made either at public auction or privately as the Receiver determines and any such sale or lease may be made from time to time as to the whole or any part or parts of the Collateral; and the Receiver may make any stipulations as to title or conveyance or commencement of title or otherwise which the Receiver deems proper; and the Receiver may buy in or rescind or vary any contract for the sale or lease of any of the Collateral or any part or parts thereof, and may resell and re-lease without being answerable for any loss occasioned thereby; and the Receiver may sell or lease any of the same as to cash or part cash and part credit or otherwise as appears to be most advantageous and at such prices as can be reasonably obtained therefor and in the event of a sale or lease on credit neither he nor the Security Agent will be accountable or charged with any monies until actually received.

Any Receiver appointed hereunder or any one or more of the Holders or any agent or representative thereof, may, as provided by the New York Uniform Commercial Code, become purchasers at any sale or other realization proceedings in respect of the Collateral, or any part thereof, whether made under the power of sale contained in this Agreement or pursuant to judicial proceedings.

The Receiver appointed and exercising powers under the provisions hereof will not be liable for any loss unless the loss is caused by the Receiver's own negligence (the Receiver will remain liable for its intentional misconduct, reckless conduct or gross negligence), and the Receiver will, when so appointed, be deemed to be the agent of the Company and the Company will be solely responsible for the Receiver's remuneration.

No purchaser at any sale and no lessee under any lease purporting to be made in pursuance of the powers set forth in Section 9.8(g) will be bound to see or inquire whether any default has been made or continues or whether any notice required hereunder has been given or as to the necessity or expediency of the stipulations subject to which such sale or lease has been made or otherwise as to the propriety of such sale or lease, or regularity of proceedings or be affected by notice that such default has been made or continues or notice given as aforesaid, or that the sale or lease is otherwise unnecessary, improper or irregular; and notwithstanding any impropriety or irregularity or notice thereof to such purchaser or lessee, the sale or lease as regards such purchaser or lessee will be deemed to be within the aforesaid power and be valid accordingly and the remedy, if any, of the Company in respect of any impropriety or irregularity whatsoever in any such sale or lease will be in damages only.

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9.9

No Suits by Holders

No Holder will have any right to institute any action, suit or proceeding at law or in equity or to exercise any other remedy authorized by this Agreement for the purposes of enforcing payment of the Principal Amount of or any premium or interest on any Note or enforcing any right on behalf of the Holders or for the execution of any trust or power hereunder or for the appointment of a liquidator or receiver or for a receiving order under Bankruptcy Law or to have the Company wound up or to file or prove a claim in any liquidation or bankruptcy proceeding or for any other remedy hereunder, unless (i) such holder has previously given to the Security Agent written notice of the happening of an Event of Default hereunder; (ii) the Majority Holders have made a request to the Security Agent and the Security Agent has been afforded reasonable opportunity either itself to proceed to exercise the powers hereinbefore granted or to institute an action, suit or proceeding in its name for such purpose; (iii) the Holders or any of them has furnished to the Security Agent, when so requested by the Security Agent, sufficient funds and security and indemnity satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby; and (iv) the Security Agent has failed to act within a reasonable time after such notification, request and offer of indemnity; in such case, but not otherwise, any Holder acting on behalf of himself and all other Holders will be entitled to take proceedings in any court of competent jurisdiction such as the Security Agent might have taken under Section 9.7; it being understood and intended that no one or more Holders will have any right in any manner whatsoever to effect, disturb or prejudice the rights hereby created by his or their action or to enforce any right hereunder or under any Note, except subject to the conditions and in the manner herein provided, and that all duties and powers hereunder will be exercised and all proceedings at law will be instituted, had and maintained by the Security Agent, except only as herein provided, and in any event for the equal benefit of all Holders.

9.10

Application of Proceeds by Security Agent

Subject to the claims of secured creditors ranking in priority to this Agreement, all monies arising from any enforcement hereof including the sale of the Collateral, together with any other monies then or thereafter in the hands of the Security Agent available for that purpose, will be applied by the Security Agent as follows:

(a)

first, to pay and discharge all rents, taxes, insurance premiums and other charges affecting the Collateral;

(b)

second, to the costs of sale or lease and taking possession, including the remuneration of the Receiver, if applicable;

(c)

third, in payment or reimbursement to the Security Agent of the remuneration, expenses, disbursements and advances of the Security Agent earned, incurred or made in the administration or execution of its powers and duties hereunder or otherwise in relation to this Agreement with interest thereon as herein provided;

(d)

fourth, to pay all amounts required to keep in good standing all liens and charges on the Collateral prior to the security interests hereby created;

(e)

fifth, in or towards payment of the Principal Amount and accrued and unpaid interest thereon, and interest on amounts in default under the Notes which are then outstanding, and all other monies owing hereunder in that order of priority; and

(f)

the balance, if any, to the Company.

If the proceeds of a sale of the Collateral by the Security Agent under Section 9.7(b) are insufficient to fully pay the balance owing to the Holders under the Notes, the Company will forthwith pay to the Security Agent the deficiency.

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9.11

Distribution of Proceeds

Payments to Holders pursuant to Section 9.10(e) will be made as follows:

(a)

at least 15 days' notice of every such payment will be given to the Holders in the manner provided in Section 11.3 specifying the time when and the place or places where the Notes are to be presented and the amount of the payment and the application thereof as between principal and interest;

(b)

payment of any Note will be made upon presentation thereof at any one of the places specified in such notice and any such Note thereby paid in full will be surrendered, otherwise a memorandum of such payment will be endorsed thereon; but the Security Agent may in its discretion dispense with presentation and surrender or endorsement in any special case upon such indemnity being given as it deems sufficient;

(c)

from and after the date of payment specified in the notice, interest will accrue only on the amount owing on each Note after giving credit for the amount of the payment specified in such notice unless the Note with respect to which such amount is owing is duly presented on or after the date so specified any payment of such amount is not made; and

(d)

the Security Agent will not be bound to apply or make any partial or interim payment of any monies coming into its hands if the amount so received by it, after reserving an amount as the Security Agent may think necessary to provide for the payment mentioned in section 9.10(a) through 9.10(d) is insufficient to make a distribution of at least 3% of the aggregate principal amount of the outstanding Notes, but it may retain the money so received by it and invest or deposit such monies until their money or the investments representing the same, with the income derived therefrom, together with any other moneys for the time being under its control is sufficient to make a distribution of at least that amount or until it otherwise considers it advisable to apply the monies. The foregoing will, however, not apply to a final payment in distribution hereunder.

9.12

Remedies Cumulative

No remedy herein conferred upon or reserved to the Security Agent, or upon or to the Holders is intended to be exclusive of any other remedy, but each and every such remedy will be cumulative and will be in addition to every other remedy given hereunder or now existing or hereafter to exist by law or by statute.

9.13

Judgment Against the Company

The Company covenants and agrees with the Security Agent that, in case of any judicial or other proceedings to enforce the rights of the Holders, judgment may be rendered against it in favour of the Holders or in favour of the Security Agent, as security agent for the Holders, for any amount which may remain due in respect of the Notes and the interest thereon.

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Article 10

CONCERNING THE SECURITY AGENT

10.1

Rights and Duties of Security Agent

(a)

In the exercise of the rights, duties and obligations prescribed or conferred by the terms of this Agreement, the Security Agent will act honestly and in good faith with a view to the best interests of the Holders and will exercise the degree of care, diligence and skill that a reasonable prudent person would exercise in comparable circumstances.

(b)

The obligation of the Security Agent to commence or continue any act, action or proceeding for the purpose of enforcing any rights of the Security Agent or the Holders under the Security will be conditional upon the Holders furnishing, when required by notice in writing by the Security Agent, sufficient funds to commence or continue such act, action or proceeding and indemnity reasonably satisfactory to the Security Agent to protect and hold harmless the Security Agent against the costs, charges and expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof. None of the provisions contained in this Agreement will require the Security Agent to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers unless indemnified and funded as aforesaid.

(c)

The Security Agent may, before commencing or at any time during the continuance of any such act, action or proceeding, require the Holders at whose instance it is acting to deposit with the Security Agent the Notes held by them, for which Notes the Security Agent will issue receipts.

10.2

Evidence, Experts and Advisers

(a)

In addition to the reports, certificates, opinions and other evidence required by this Agreement, the Company will furnish to the Security Agent such additional evidence of compliance with any provision hereof, and in such form, as may be prescribed by Applicable Law or as the Security Agent may reasonably require by written notice to the Company.

(b)

In the exercise of its rights, duties and obligations, the Security Agent, if it is acting in good faith, may rely as to the truth of the statements and the accuracy of the opinions expressed therein, upon statutory declarations, opinions, reports, certificates or other evidence referred to in Section 10.2(a) provided that such evidence complies with Applicable Law and that the Security Agent examines the same in order to determine whether such evidence indicates compliance with the applicable requirements of this Agreement.

(c)

Whenever Applicable Law requires that evidence referred to in Section 10.2(a) be in the form of a statutory declaration, the Security Agent may accept such statutory declaration in lieu of a certificate of the Company required by any provision hereof. Any such statutory declaration may be made by one or more of the president, the secretary, the treasurer, or any vice-president, or a manager of the Company.

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(d)

The Security Agent shall employ Monitoring Agent at the industry standard rates to help with admin and monitoring work or retain such counsel, accountants, engineers, appraisers or other experts or advisers as it may reasonably require for the purpose of discharging its duties hereunder and will not be responsible for any the negligent conduct of any of them (but will remain liable for the intentional misconduct, reckless conduct or gross negligence of them).

(e)

All costs incurred by the Security Agent in carrying out its duties as security agent under the Security pursuant to this Agreement shall be paid by the Company, immediately on demand and shall be secured by the Security.

10.3

Security Agent Not Required to Give Security

The Security Agent will not be required to give any bond or security in respect of the execution of the powers granted to it under this Agreement or otherwise in respect of the premises.

10.4

Protection of Security Agent

In addition to any protection afforded to the Security Agent at law, it is expressly declared and agreed between the Holders, the Company and the Security Agent as follows:

(a)

The Security Agent will not be liable for or by reason of any statements of fact or recitals in this Agreement or in the Notes (except in the certificate of the Security Agent thereon) or be required to verify the same, but all such statements or recitals are and will be deemed to be made by the Company.

(b)

The Security Agent is not obliged to see to or to require evidence of the registration or filing (or renewal thereof) of this Agreement or any instrument ancillary or supplemental hereto.

(c)

The Security Agent will not be bound to give notice to any person or persons by reason of the execution hereof.

(d)

The Security Agent will not incur any liability or responsibility whatsoever or be in any way responsible for the consequence of any breach on the part of the Company of any of the covenants herein contained or of any acts of the agents or servants of the Company.

(e)

Subject to Section 10.1(a), the Company and the Holders acknowledge and agree that the burden and obligation of supervising and utilizing the security interests granted hereunder is that of the Holders and not that of the Security Agent, that the sole obligation of the Security Agent is to exercise the powers granted hereunder only and on the specific written instructions of the Holders, and that the Company will save and hold harmless the Security Agent from all liability for any and all acts or omissions in respect hereto, except for the Security Agent’s intentional misconduct, reckless conduct or gross negligence.

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(f)

The Security Agent, its Affiliates and their respective directors, officers and employees and advisors, including without limitation Monitoring Agent, in a personal or any other capacity, may buy, lend upon and deal in securities of the Company and in the Notes and generally may contract and enter into financial transactions with the Company or any Affiliate without being liable to account for any profit made thereby, except to the extent Section 16 of the Securities Exchange Act of 1934 makes them accountable for any such profit.

(g)

Subject to Section 10.1(a), in the event of any dispute arising regarding any term of this Agreement, the Security Agent may, at its option, refuse to comply with any or all demands made under this Agreement until such dispute is resolved either by agreement among the parties or by a court of competent jurisdiction.

(h)

Subject to Section 10.1(a), the Security Agent is entitled not to act and will not be liable for refusing to act unless it has received clear and reasonable instructions from the Company or the Holders, as the case may be, which comply with the terms of this Agreement and which do not require the exercise of any discretion or independent judgment on the part of the Security Agent.

(i)

The Security Agent is entitled to refuse all instructions and will not be liable for refusing instructions which in any way alter the purpose of this Agreement unless such instructions, if affecting the Company, are consented to by the Company and, if affecting the Holders, are approved by the Majority Holders.

(j)

The Security Agent will not be bound to act upon documents which are not authorized pursuant to the terms of this Agreement.

(k)

The Security Agent may accept communications by facsimile transmission or other electronic means that enable the Security Agent to confirm the identity of the sender and may rely as to the truth of the information contained in such communications.

10.5

Resignation, Removal or Replacement of Security Agent

The Security Agent may resign its agency, duties and powers and be discharged from all further duties and liabilities hereunder by giving to the Company 30 days' notice in writing or such shorter notice as the Company may accept as sufficient. The Majority Holders will have power by written notice at any time to remove the Security Agent and to appoint a new Security Agent. In the event of the Security Agent resigning or being removed as aforesaid or being dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting hereunder, the Majority Holders will forthwith appoint a new Security Agent; failing such appointment by the Majority Holders the retiring Security Agent or any Holder may apply to a Judge of the Supreme Court of Ontario, for the appointment of a new Security Agent; but any new Security Agent so appointed by the Majority Holders or by the Court will be subject to removal as aforesaid by the Holders. On any new appointment the new Security Agent will be vested with the same powers rights, duties and responsibilities as if it had been originally named herein as Security Agent without any further assurance, conveyance, act or deed; but there will be immediately executed, at the expense of the Company, all such conveyances or other instruments as may, in the opinion of counsel, be necessary or advisable for the purpose of assuring the same to the new Security Agent.

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10.6

Acceptance of Agency

The Security Agent hereby accepts the appointment as agent for the Holders pursuant to this Agreement and agrees to perform and administer the Security for and on behalf of the Holders upon the terms and conditions herein set forth.

10.7

Authority of Security Agent

Subject to Section 10.1(a), the Security Agent will have the authority to take any action on behalf of the Holders which is, in its opinion, acting reasonably:

(a)

contemplated by this Agreement, any other Loan Document, or the Security;

(b)

not inconsistent with its rights, powers, duties or obligations under this Agreement; or

(c)

necessary or desirable to exercise its rights and powers and to perform its duties and obligations under this Agreement.

10.8

Indemnification

Without limiting any protection or indemnity of the Security Agent under any other provision of this Agreement, or otherwise at law, the Company hereby agrees to indemnify and hold harmless the Security Agent from and against any and all liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements, including reasonable legal or advisor fees and disbursements, or of whatever kind or nature, which may at any time be imposed on, incurred by or asserted against the Security Agent in connection with the performance of its duties and obligations hereunder, other than such liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements arising by reason of the negligence or fraud of the Security Agent. This provision shall survive the resignation or removal of the Security Agent, or the termination of this Agreement. The Security Agent shall not be under any obligation to prosecute or defend any action or suit in respect of the relationship which, in the opinion of its counsel, may involve it in expense or liability, unless the Company shall, so often as required, furnish the Security Agent with satisfactory indemnity and funding against such expense or liability.

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Article 11

GENERAL

11.1

Reliance and Non-Merger

All covenants, agreements, representations and warranties of the Company and any other Obligor made in this Agreement, in any other Loan Document, or in any certificate or other document signed by any of its managers or officers and delivered by or on behalf of the Company or any other Obligor pursuant hereto or thereto are material, are deemed to have been relied upon by the Holders, and may be enforced strictly by the Holders, notwithstanding any investigation heretofore or hereafter made by the Holder or counsel to or any employee or other representative of any Holder and shall survive the execution and delivery of this Agreement and the other Loan Documents until the payment in full of all the Obligations. Notwithstanding the foregoing, the covenants, agreements, representations and warranties of the Company contained in Sections 7.1(a) to (i) inclusive shall survive indefinitely.

11.2

Amendment and Waiver

Where any amendment, waiver, discharge or termination relates to the following matters, the amendment, waiver, discharge or termination requires approval by the Super-Majority Holders:

(a)

any reduction in the rate or amount of any principal, interest or fees or any other amount payable by the Company or any alteration in the currency or mode of calculation or computation thereof;

(b)

any extension of the time for any payments required to be made by the Company;

(c)

any change in the Maturity Date hereof;

(d)

any release or discharge of all or substantially all of the Security;

(e)

the definition of Majority Holders; or

(f)

an assignment or transfer by the Company of any of its rights and obligations under the Loan Documents.

Any other amendment, waiver, discharge or termination requires the approval of only the Majority Holders, which approval, if obtained, shall be binding upon all the Holders.

No amendment or waiver of any provision of this Agreement or any other Loan Document or consent to any departure by the Company or any other Obligor from any provision hereof or thereof is effective unless it is in writing and signed by an officer of the Majority Holders or Super-Majority Holders (as the case may be) and the relevant counterparty to such document. Such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given.

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11.3

Notices

Any notice or other communication required or permitted to be given hereunder shall be in writing and shall be given by electronic mail or by hand-delivery as hereinafter provided. Any such notice, if sent by electronic mail, shall be deemed to have been received on the day of sending, or if delivered by hand shall be deemed to have been received at the time it is delivered to the applicable address noted below. Notices of change of address shall also be governed by this Section. Any such notice must be sent:

(a)

if to a Holder or its nominee, to such Holder or nominee at the address specified for such communications in Schedule 1.1(a), or at such other address as such Holder or nominee shall have specified to the Company in writing; (ii) if to any other Holder, to such Holder at such address as such other Holder shall have specified to the Company in writing;

(b)

if to the Company or the Guarantors, to the Company at:

Arkados Group, Inc.

211 Warren Street, Suite 320Newark, New Jersey07103

Attention:	Terrence DeFranco, CEO and Chairman
E-mail:	tmdefranco@arkadosgroup.com

or at such other address as the Company shall have specified to each Holder and the Security Agent in writing; or

(c)

if to the Security Agent, to the Security Agent at:

AIP Asset Management Inc.

TD North Tower

77 King Street W, Suite 4140

Toronto, ON M5K 1E7

Attention:	Jay Bala, Senior Portfolio Manager
E-mail:	jay@aipassetmanagement.com

or at such other address as the Security Agent shall have specified to the Company and each Holder in writing.

Notices under this Section 11.3 will be deemed given only when actually received.

Each document, instrument, financial statement, report, notice or other communication delivered in connection with this Agreement shall be in English or accompanied by an English translation thereof.

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11.4

Time

Time is of the essence of this Agreement and the other Loan Documents.

11.5

Further Assurances

Whether before or after the occurrence of an Event of Default, the Company shall, and shall cause the other Obligors to, at their own expense do, make, execute or deliver, or cause to be done, made, executed or delivered, all such further acts, things, agreements, documents and instruments in connection with this Agreement and the other Loan Documents as the Majority Holders may request from time to time for the purpose of giving effect to the terms of this Agreement and the other Loan Documents including, without limitation, for the purpose of facilitating the enforcement of the Security, all immediately upon the request of the Majority Holders.

11.6

Assignment

This Agreement and the other Loan Documents shall enure to the benefit of and be binding upon the parties hereto and thereto, their respective successors and any permitted assignee of some or all of the parties' rights or obligations under this Agreement and the other Loan Documents as permitted under this Section 11.6.

None of the Obligors may assign all or any part of its rights, benefits or obligations under this Agreement or any of the other Loan Documents without the prior written consent of the Majority Holders and then only in compliance with applicable securities laws.

Any Holder may assign or transfer all or any part of its rights in respect of the Obligations, any Note, this Agreement and any of the other Loan Documents at any time to any other person except as may be specifically prohibited by the terms of this Agreement, provided such assignment or transfer complies with applicable securities laws. Neither the Company nor the Security Agent shall be bound by any such transfer nor obligated to any transferee until notice in writing of such transfer has been provided by the transferor to the Company and the Security Agent, as applicable, together with a duly executed form of transfer. Upon receipt of such notice, the Company shall from and after the date of such notice, pay all amounts owing under or in respect of such Notes to the transferee. The transferee of a Note shall be entitled, after the appropriate notice of transfer has been provided to the Company and the Security Agent, and upon compliance with all other conditions in that regard required by this Agreement or by law, to be treated as the owner of such Note free from all equities or rights of set-off or counterclaim between the Company and the transferor or any previous holder of such Note, save in respect of equities of which the Company is required to take notice by statute or by order of a court of competent jurisdiction.

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11.7

Entire Agreement

This Agreement and the other Loan Documents constitute the entire agreement between the parties pertaining to the subject matter described herein and therein. There are no warranties, conditions or representations (including any that may be implied by statute), and there are no agreements in connection with such subject matter except as specifically set forth or referred to in this Agreement and the other Loan Documents. No reliance is placed on any warranty, representation, opinion, advice or assertion of fact made either prior to, contemporaneously with, or after the entering into of this Agreement and the other Loan Documents, or any amendment or supplement thereto, by any party to this Agreement or any of the other Loan Documents or its directors, officers, partners, employees or agents, where applicable, to any other party to this Agreement or any of the other Loan Documents or its directors, officers, partners, employees or agents, where applicable, except to the extent that the same has been reduced to writing and included as a term of this Agreement or any of the Loan Documents.

11.8

Governing Law

Except as provided in the next sentence, this Agreement shall be governed by and construed in accordance with the laws of the State of New York without the application of any choice of laws provisions thereof. Notwithstanding the foregoing, the relationships among the Security Agent, the Holders, and their respective agents, shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.

11.9

Attornment

Except as provided in the next sentence, the parties hereto irrevocably submit and attorn to the non-exclusive jurisdiction of the courts of the State of New York in New York County and the U.S. District Court for the Southern District of New York for all matters arising out of or in connection with this Agreement and the other Loan Documents. The Security Agent, the Holders, and their respective agents irrevocably submit and attorn to the non-exclusive jurisdiction of the courts of the Province of Ontario for all matters affecting their duties to each other arising out of or in connection with this Agreement and the other Loan Documents.

11.10

Counterparts

This Agreement may be signed in counterparts and each such counterpart will constitute an original document and all of such counterparts, when taken together, will constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by facsimile, PDF via email or by other electronic communication will be effective as delivery of a manually executed counterpart of this Agreement.

[Signature page follows.]

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IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the date first stated above.

		ARKADOS GROUP, INC

		by	/s/ Terrence DeFranco
			Name: Terrence DeFranco
			Title: Chief Executive Officer

		AIP ASSET MANAGEMENT INC., as Security Agent

		by	/s/ Jay Bala
			Name: Jay Bala, CFA
			Title: President

		AIP GLOBAL MACRO FUND, LP, as a Holder

		by	/s/ Jay Bala
			Name: Jay Bala, CFA
			Title: President

		AIP GLOBAL MACRO CLASS, as a Holder

		by	/s/ Jay Bala
			Name: Jay Bala, CFA
			Title: President

		AIP CANADIAN ENHANCED INCOME CLASS, as a Holder

		by	/s/ Jay Bala
			Name: Jay Bala, CFA
			Title: President

Exhibit 10.4

CONVERTIBLE NOTE

UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY IN OR TO A PERSON IN CANADA BEFORE SEPTEMBER 2, 2017.

THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE MAY BE OFFERED OR SOLD ONLY IF REGISTERED UNDER APPLICABLE SECURITIES LAWS OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THIS NOTE IS SUBJECT TO CERTAIN ADDITIONAL RESTRICTIONS ON TRANSFER SET FORTH IN THE NOTE PURCHASE AGREEMENT.

ARKADOS GROUP, INC

10% SECURED CONVERTIBLE NOTE

NOTE NUMBER 2017-001

Issue Date: May 1, 2017

Principal Amount: U.S. $[ ]

For value received, Arkados Group, Inc. (the " Issuer "), having a principal place of business at 211 Warren Street, Suite 320, Newark, New Jersey 07103, promises to pay on or before May 1, 2018, to ______________. (together with its successors and assigns, the " Holder "), or any other bona fide holder of this Note, the Principal Amount specified above plus the amount of interest specified in Section 1 below, payable in arrears on each Interest Payment Date (as defined below).

This Note is issued under a Note Purchase Agreement dated as of May 1, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the " Note Purchase Agreement "), between the Issuer, AIP Asset Management Inc., in its capacity as Security Agent (as defined therein), and AIP Canadian Enhanced Income Class, AIP Global Macro Class, and AIP Global Macro Fund L.P., and any other parties that become Holders from time to time, as holders (together with their successors and assigns, collectively, the " Holders "). Unless otherwise defined, all capitalized terms used herein have the meanings specified in the Note Purchase Agreement. The Issuer’s obligations under this Note are secured pursuant to that certain Security Agreement dated as of May 1, 2017, made by and among Issuer, Arkados, Inc., Arkados Energy Solutions, LLC, and AIP Asset Management Inc., in its capacity as security agent for the Holders.

The total consideration payable by Holder to Issuer for this Note pursuant to the Note Purchase Agreement is U.S. $__________, payable by wire transfer of immediately available funds. The Issuer acknowledges that the Principal Amount of this Note exceeds the total consideration payable pursuant to the Note Purchase Agreement and that such $__________ excess is a 15 percent original issue discount and shall be fully earned and charged to the Issuer upon the execution of this Note, and shall be paid to the Holder as part of the outstanding Principal Amount of this Note.

1. Interest . Interest shall accrue on the Principal Amount of this Note from the date of transferring the funds to escrow until repayment in full. The interest shall accrue from day to day at the applicable Interest Rate, both before and after default, demand, maturity and judgment, and shall be calculated on the basis of the actual number of days elapsed and on the basis of a year of 365 or 366 days, as applicable.

The Notes shall bear interest at rate per annum equal to 10% plus, if an Event of Default has occurred, 10% per annum, while such Event of Default continues (the " Interest Rate "). Interest shall be calculated and payable monthly, in advance on the first day of each month (each, an " Interest Payment Date ") until the entire Principal Amount of this Note has been repaid in full, provided that interest for the first month this Note is outstanding shall be payable by the Issuer to the Holder, in advance, on the date of issuance of this Note out of the proceeds of the purchase price of this Note.

2. Payments . All payments made pursuant to this Note (in respect of principal, interest or otherwise) shall be made in full without set-off or counterclaim, and free of and without deduction or withholding for any present or future Taxes, other than Excluded Taxes.

3. Conversion . This Note may be converted into the shares or Membership Interests of the Issuer in accordance with the terms of the Note Purchase Agreement.

4. Assignments and Transfers . This Note may not be assigned or transferred by the Issuer except in accordance with the Note Purchase Agreement.

5. Note Register . The Holder, acting as the agent of the Issuer, shall maintain a register on which it enters the name and address of any transferee of an interest in this Note (each, a " Transferee "), and the commitment, principal amount and stated interest of each such Transferee's interest in the Note (the " Note Register "). The entries in the Note Register shall be conclusive, and both the Holder and the Issuer shall treat each Person whose name is recorded in the Note Register as the owner of the interest transferred to a Transferee for all purposes, notwithstanding any notice to the contrary. This Note is intended to be treated as a registered obligation for United States federal income tax purposes. Any right or title in or to the Note (including with respect to the principal amount and any interest thereon) may only be assigned or otherwise transferred through the Note Register. This provision shall be construed so that the Note is at all times maintained in "registered form" within the meaning of Sections 163(f), 165(g), 871(h)(2), and 881(c)(2) of the U.S. Internal Revenue Code and Section 5f.103-1(c) of the U.S. Treasury Regulations.

6. Severability . In the event that one or more of the provisions of this Note is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

7. Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of New York without the application of any choice of laws provisions thereof.

ARKADOS GROUP, INC.

/s/ Terrence DeFranco
By:	Terrence DeFranco
Title:	Chief Executive Officer

Sworn to before me this 1 ^st day of May, 2017.

/s/ Lino M. Lopez
Notary Public

Exhibit 10.5

SECURITY AGREEMENT

This Security Agreement , dated as of May 1, 2017, as amended, amended and restated, supplemented, or otherwise modified from time to time in accordance with the provisions hereof (“ Agreement ”), is made by and among (i) Arkados Group, Inc. , a Delaware corporation (the “ Borrower ”), as the borrower, (ii) Arkados, Inc., a Delaware corporation, as a guarantor, and Arkados Energy Solutions, LLC , a Delaware limited liability company, as a guarantor, (each of Arkados, Inc. and Arkados Energy Solutions, LLC is a “ Guarantor ”; and collectively they are the “ Guarantors ”), and (iii) AIP Asset Management Inc. , an Ontario, Canada corporation (the “ Secured Party ”), as the secured party, in its capacity as security agent for the Holders. Each of the Borrower and the Guarantor shall be referred to herein as a “ Grantor ” and collectively, the “ Grantors .”

RECITALS

WHEREAS, on the date hereof, the Borrower and the Secured Party entered into a note purchase agreement (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Note Purchase Agreement ”) pursuant to which the Secured Party agreed to advance loans in the aggregate principal amount of $2,500,000 to the Borrower;

WHEREAS, each Guarantor has agreed to unconditionally guarantee the Secured Obligations (as hereinafter defined) in connection with the Note Purchase Agreement and the other Loan Documents (as such term is defined in the Note Purchase Agreement); and

WHEREAS, each Grantor will receive substantial direct or indirect benefits from the execution, delivery and performance of its obligations under the Note Purchase Agreement and the other Loan Documents (as such term is defined in the Note Purchase Agreement) and each is, therefore, willing to enter into this Agreement.

NOW THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor and the Secured Party hereby agree as follows:

Article I
Definitions and interpretation

Section 1.01 Definitions .

(a) Unless otherwise defined herein or in the Note Purchase Agreement, capitalized terms used herein that are defined in the UCC shall have the meanings assigned to them in the UCC; provided, however , that if a term is defined in Article 9 of the UCC differently than in another Article of the UCC, the term has the meaning specified in Article 9.

(b) The following terms shall have the following meanings:

Security Agreement

[ n ]

“ Agreement ” has the meaning set forth in the Preamble hereof.

“ Borrower ” has the meaning set forth in the Preamble hereof.

“ Contracts ” means, collectively, with respect to each Grantor, the Intellectual Property Licenses, all sale, service, performance, equipment or property lease contracts, agreements and grants and all other contracts, agreements or grants (in each case, whether written or oral, or third party or intercompany), between such Grantor and any third party, and all assignments, amendments, restatements, supplements, extensions, renewals, replacements or modifications thereof.

“ Control ” means (i) with respect to any Deposit Account, “control,” within the meaning of Section 9-104 of the UCC, (ii) with respect to any Securities Account, Security Entitlement, Commodity Contract or Commodity Account, control within the meaning of Section 9-106 of the UCC, (iii) with respect to any Uncertificated Security, control within the meaning of Section 8-106(c) of the UCC, (iv) with respect to any Certificated Security, control within the meaning of Section 8-106(a) or (b) of the UCC, (v) with respect to any Electronic Chattel Paper, control within the meaning of Section 9-105 of the UCC, (vi) with respect to Letter-of-Credit Rights, control within the meaning of Section 9-107 of the UCC and (vii) with respect to any “transferable record” (as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), control within the meaning of Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in the jurisdiction relevant to such transferable record.

“ Copyrights ” means, collectively, with respect to each Grantor, all copyrights (whether statutory or common law, whether established or registered in the United States or any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished), including those listed in Schedule I , all tangible embodiments of the foregoing and all copyright registrations and applications made by such Grantor, in each case, whether now owned or hereafter created or acquired by or assigned to such Grantor, together with any and all (i) rights and privileges arising under applicable law and international treaties and conventions with respect to such Grantor’s use of such copyrights, (ii) reissues, renewals, continuations and extensions thereof and amendments thereto, (iii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect thereto, including damages and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present or future infringements thereof.

“ Distributions ” means, collectively, with respect to each Grantor, all dividends, cash, options, warrants, rights, instruments, distributions, returns of capital or principal, income, interest, profits and other property, interests (debt or equity) or proceeds, including as a result of a split, revision, reclassification or other like change of the Pledged Securities, from time to time received, receivable or otherwise distributed to such Grantor in respect of or in exchange for any or all of the Pledged Securities or Pledged Debt.

Security Agreement

[ n ]

“ Equity Interests ” mean common stock, preferred stock, limited liability company membership interests, partnership interests, and any other ownership interests in any entity or whatever class that provides its holder voting rights, rights to dividends or distributions of earnings of the entity, or rights to liquidating distributions upon termination of the entity. Equity Interests also include options, warrants, and other securities or instruments convertible into such ownership interests.

“ Excluded Property ” means, collectively:

(i) any asset or property that is subject to a Permitted Lien, but solely to the extent that a grant or perfection of a security interest hereunder in favor of the Secured Party is prohibited by, results in a breach or termination of, or constitutes a default under, any agreement governing such Permitted Lien;

(ii) any asset or property to the extent that the grant of a security interest hereunder in favor of the Secured Party is prohibited by applicable law or requires a consent not obtained from any Governmental Authority pursuant to any applicable law (including any license granted in the name of any Grantor by any Governmental Authority, including the Securities Exchange Commission), in each case after giving effect to the applicable anti-assignment provisions of the UCC and other applicable law and other than Proceeds and receivables thereof, the assignment of which is expressly deemed effective under the UCC or other applicable law notwithstanding such prohibition;

(iii) any United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant, attachment or enforcement of a security interest therein would, under applicable federal law, impair the registrability of such applications or the validity or enforceability of registrations issuing from such applications; and

(iv) any asset as to which the Secured Party shall reasonably determine, in writing, that the costs of obtaining a Lien thereon or perfection thereof are excessive in relation to the benefit to the Secured Party of the security to be afforded thereby.

provided, however , that “Excluded Property” shall not include any Proceeds, products, substitutions or replacements of any Excluded Property (unless such Proceeds, products, substitutions or replacements would constitute Excluded Property).

“ Grantor(s) ” has the meaning set forth in the Preamble hereof.

“ Guarantor ” has the meaning set forth in the Preamble hereof.

“ Intellectual Property Collateral ” means, collectively, the Patents, Trademarks (excluding only United States intent-to-use Trademark applications to the extent that and solely during the period in which the grant of a security interest therein would impair, under applicable federal law, the registrability of such applications or the validity or enforceability of registrations issuing from such applications), Copyrights, Trade Secrets, Intellectual Property Licenses and all other industrial, intangible and intellectual property of any type, including mask works and industrial designs.

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“ Intellectual Property Licenses ” means, collectively, with respect to each Grantor, all license and distribution agreements with any Person with respect to any Patent, Trademark, Copyright or Trade Secret, whether such Grantor is a licensor or licensee, distributor or distributee under any such license or distribution agreement, including such agreements listed in Schedule I , together with any and all (i) renewals, extensions, supplements and continuations thereof, (ii) income, fees, royalties, damages, claims and payments now and hereafter due and/or payable thereunder and with respect thereto including damages and payments for past, present or future infringements or violations thereof, (iii) rights to sue for past, present and future infringements or violations thereof and (iv) other rights to use, exploit or practice any or all of the Patents, Trademarks, Copyrights or Trade Secrets.

“ Note Purchase Agreement ” has the meaning set forth in the first Recital hereof.

“ Organizational Documents ” means the certificate of incorporation and by-laws or any comparable organizational documents of any corporate entity (including limited liability companies and partnerships).

“ Patents ” means, collectively, with respect to each Grantor, all patents issued or assigned to, and all patent applications and registrations made by, such Grantor including those listed in Schedule I , whether issued, established or registered or recorded in the United States or any other country or any political subdivision thereof, and all tangible embodiments of the foregoing, together with any and all (i) rights and privileges arising under applicable law and international treaties and conventions with respect to such Grantor’s use of any patents, (ii) inventions and improvements described and claimed therein, (iii) reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof and amendments thereto, (iv) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable thereunder and with respect thereto including damages and payments for past, present or future infringements thereof, (v) rights corresponding thereto throughout the world and (vi) rights to sue for past, present or future infringements thereof.

“ Pledged Collateral ” has the meaning set forth in Section 2.01.

“ Pledged Debt ” means, with respect to each Grantor, all Debt (including intercompany notes) from time to time owed to such Grantor by any obligor, including the Debt described in Schedule II , and all interest, cash, instruments and other property, assets or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such Debt and all certificates, instruments or agreements evidencing such Debt, and all assignments, amendments, restatements, supplements, extensions, renewals, replacements or modifications thereof.

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“ Pledged Securities ” means, collectively, with respect to each Grantor, (i) all issued and outstanding Equity Interests that are owned by such Grantor and all options, warrants, rights, agreements and additional Equity Interests of whatever class of any such issuer acquired by such Grantor in any manner, together with all claims, rights, privileges, authority and powers of such Grantor relating to such Equity Interests in each such issuer or under any Organizational Document of each such issuer, and the certificates, instruments and agreements representing such Equity Interests and any and all interest of such Grantor in the entries on the books of any financial intermediary pertaining to such Equity Interests, including the Equity Interests listed in Schedule II , and (ii) all additional Equity Interests of any issuer from time to time acquired by or issued to such Grantor and all options, warrants, rights, agreements and additional Equity Interests of whatever class of any such issuer from time to time acquired by such Grantor in any manner, together with all claims, rights, privileges, authority and powers of such Grantor relating to such Equity Interests or under any Organizational Document of any such issuer, and the certificates, instruments and agreements representing such Equity Interests and any and all interest of such Grantor in the entries on the books of any financial intermediary pertaining to such Equity Interests, from time to time acquired by such Grantor in any manner.

“ Secured Obligations ” means (i) all obligations of the Borrower and the Guarantor arising under the Note Purchase Agreement and the other Loan Documents, including with respect to the due and prompt payment of (A) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Notes, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (B) all other monetary obligations, including fees, costs, attorneys’ fees and disbursements, reimbursement obligations, contract causes of action, expenses and indemnities, whether primary, secondary, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower and the Guarantor under or in respect of any Loan Document and (ii) the due and prompt performance of all other covenants, duties, debts, obligations and liabilities of any kind of the Borrower and the Guarantor under or in respect of the Note Purchase Agreement, this Agreement, the other Loan Documents or any other document made, delivered or given in connection with any of the foregoing, in each case whether evidenced by a note or other writing, whether allowed in any bankruptcy, insolvency, receivership or other similar proceeding, whether arising from an extension of credit, issuance of a letter of credit, acceptance, loan, guaranty, indemnification or otherwise, and whether primary, secondary, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, fixed or otherwise.

“ Secured Party ” has the meaning set forth in the Preamble hereof.

“ Securities Collateral ” means, collectively, the Pledged Securities, the Pledged Debt and the Distributions.

“ Trade Secrets ” means, collectively, with respect to each Grantor, all know-how, trade secrets, manufacturing and production processes and techniques, inventions, research and development information, technical, marketing, financial and business data and databases, pricing and cost information, business and marketing plans, customer and supplier lists and information, all other confidential and proprietary information and all tangible embodiments of the foregoing, together with any and all (i) rights and privileges arising under applicable law and international treaties and conventions with respect to such trade secrets, (ii) income, fees, royalties, damages, claims and payments now or hereafter due and/or payable with respect thereto including damages and payments for past, present or future misappropriations thereof, (iii) rights corresponding thereto throughout the world and (iv) rights to sue for past, present or future misappropriations thereof.

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“ Trademarks ” means, collectively, with respect to each Grantor, all trademarks (including service marks), slogans, logos, symbols, certification marks, collective marks, trade dress, uniform resource locators (URL’s), domain names, corporate names and trade names, whether statutory or common law, whether registered or unregistered and whether established or registered in the United States or any other country or any political subdivision thereof, including those listed in Schedule I , that are owned by or assigned to such Grantor, all registrations and applications for the foregoing and all tangible embodiments of the foregoing, together with, in each case, the goodwill symbolized thereby and any and all (i) rights and privileges arising under applicable law and international treaties and conventions with respect to such Grantor’s use of any trademarks, (ii) reissues, continuations, extensions and renewals thereof and amendments thereto, (iii) income, fees, royalties, damages and payments now and hereafter due and/or payable thereunder and with respect thereto, including damages, claims and payments for past, present or future infringements thereof, (iv) rights corresponding thereto throughout the world and (v) rights to sue for past, present and future infringements thereof.

“ UCC ” means the Uniform Commercial Code as in effect from time to time in the State of New York; provided, however , that if by reason of mandatory provisions of law, any or all of the perfection or priority of the Secured Party’s security interest in any item or portion of the Pledged Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “UCC” means the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection or priority and for purposes of definitions relating to such provisions.

Section 1.02 Interpretation. The rules of interpretation specified in the Note Purchase Agreement shall be applicable to this Agreement. All references in this Agreement to Sections are references to Sections of this Agreement unless otherwise specified. The word “including” and words of similar import shall mean “including without limitation,” unless otherwise specified.

Section 1.03 Schedules. The Secured Party and each Grantor agree that the Schedules hereof and all descriptions of Pledged Collateral contained in the Schedules and all amendments and supplements thereto are and shall at all times remain a part of this Agreement.

Article II
Grant of security interest

Section 2.01 Grant of Security Interest. As collateral security for the payment and performance in full of all the Secured Obligations, each Grantor hereby pledges and grants to the Secured Party a Lien on, and security interest in and to, all of the right, title and interest of such Grantor in, to and under the following property, wherever located, and whether now existing or hereafter arising or acquired from time to time (collectively, the “ Pledged Collateral ”):

(a) all Accounts;

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(b) all Equipment, Goods, Inventory and Fixtures;

(d) all Letters of Credit and Letter-of-Credit Rights;

(e) all Securities Collateral;

(f) all Investment Property;

(g) all Intellectual Property Collateral;

(h) all General Intangibles;

(i) all Money and all Deposit Accounts;

(j) all Supporting Obligations;

(k) all books and records, customer lists, credit files, computer files, programs, printouts and other computer materials and records relating to the Pledged Collateral and any General Intangibles at any time evidencing or relating to any of the foregoing; and

(l) to the extent not covered by clauses (a) through (k) of this sentence, all other assets, personal property and rights of such Grantor, whether tangible or intangible, all Proceeds and products of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of, each of the foregoing, and any and all Proceeds of any insurance, indemnity, warranty or guaranty payable to such Grantor from time to time with respect to any of the foregoing.

Notwithstanding anything to the contrary contained in clauses (a) through (l) above, the security interest created by this Agreement shall not extend to, and the term “Pledged Collateral” shall not include, any Excluded Property, provided that , if any Excluded Property would have otherwise constituted Pledged Collateral, when such property shall cease to be Excluded Property (including as a result of not being subject to any Permitted Liens), such property shall be deemed at all times from and after the date hereof to constitute Pledged Collateral.

The Grantors shall from time to time at the request of the Secured Party give written notice to the Secured Party identifying in reasonable detail the Excluded Property (and stating in such notice that such Excluded Property constitutes “Excluded Property”) and shall provide to the Secured Party such other information regarding the Excluded Property as the Secured Party may reasonably request.

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Section 2.02 Filings .

(a) Each Grantor hereby irrevocably authorizes the Secured Party at any time and from time to time to file in any relevant jurisdiction any financing statements (including fixture filings) and amendments thereto that contain the information required by Article 9 of the UCC of each applicable jurisdiction for the filing of any financing statement or amendment relating to the Pledged Collateral, including (i) whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor, (ii) any financing or continuation statements or other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest granted by such Grantor hereunder, without the signature of such Grantor where permitted by law, including the filing of a financing statement describing the Pledged Collateral as “all assets now owned or hereafter acquired by the Grantor or in which the Grantor otherwise has rights” and (iii) in the case of a financing statement filed as a fixture filing or covering Pledged Collateral constituting minerals or the like to be extracted or timber to be cut, a sufficient description of the real property to which such Pledged Collateral relates. Each Grantor agrees to provide all information described in the immediately preceding sentence to the Secured Party promptly upon request by the Secured Party.

(b) Each Grantor hereby further irrevocably authorizes the Secured Party to file with the United States Patent and Trademark Office and the United States Copyright Office (and any successor office and any similar office in any United States state or other country) this Agreement and other documents for the purpose of perfecting, confirming, continuing, enforcing or protecting the security interest granted by such Grantor hereunder, without the signature of such Grantor where permitted by law, and naming such Grantor as debtor, and the Secured Party as secured party.

Article III
Perfection and further assurances

Section 3.01 Perfection of Certificated Securities Collateral . Each Grantor represents and warrants that all certificates, agreements or instruments representing or evidencing the Securities Collateral in existence on the date hereof have been delivered to the Secured Party in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank and that (assuming continuing possession by the Secured Party of any such Securities Collateral) the Secured Party has a perfected first priority security interest therein, subject only to the Permitted Liens. Each Grantor hereby agrees that all certificates, agreements or instruments representing or evidencing the Securities Collateral acquired by such Grantor after the date hereof shall immediately upon receipt thereof by such Grantor be held by or on behalf of and delivered to the Secured Party in suitable form for transfer by delivery or accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Secured Party.

The Secured Party shall have the right, at any time upon the occurrence and during the continuance of any Event of Default, to endorse, assign or otherwise transfer to or to register in the name of the Secured Party or any of its nominees or endorse for negotiation any or all of the Securities Collateral, without any indication that such Securities Collateral is subject to the security interest hereunder; provided, however , that after any such Event of Default has been waived in accordance with the provisions of the Note Purchase Agreement and to the extent the Secured Party has exercised its rights under this sentence, the Secured Party shall, promptly after the reasonable request of the applicable Grantor(s), cause such Securities Collateral to be transferred to, or request that such Securities Collateral is registered in the name of, the applicable Grantor(s) to the extent it or its nominees holds an interest in such Securities Collateral at such time. In addition, upon the occurrence and during the continuance of an Event of Default, the Secured Party shall have the right to exchange certificates representing or evidencing Securities Collateral for certificates of smaller or larger denominations.

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Section 3.02 Perfection of Uncertificated Securities Collateral . Each Grantor represents and warrants that, subject only to the Permitted Liens, the Secured Party has a perfected first priority security interest in all uncertificated Pledged Securities pledged by it hereunder that are in existence on the date hereof. Each Grantor hereby agrees that if any of the Pledged Securities are at any time not evidenced by certificates of ownership, such Grantor will cause the issuer thereof either (a) to register the Secured Party as the registered owner of such securities or (b) to agree in an authenticated record with such Grantor and the Secured Party that such issuer will comply with instructions with respect to such securities originated by the Secured Party without further consent of such Grantor, (c) upon request by the Secured Party, provide to the Secured Party an opinion of counsel, in form and substance reasonably satisfactory to the Secured Party, confirming such pledge and perfection thereof, (d) request the issuer of such Pledged Securities to cause such Pledged Securities to become certificated and in the event such Pledged Securities become certificated, to deliver such Pledged Securities to the Secured Party in accordance with the provisions of Section 3.01. Each Grantor hereby agrees that if any of the Pledged Securities are evidenced by certificates of ownership, such certificates of ownership will be (i) transferred to the Secured Party, endorsed in blank, and (ii) in the case of Pledged Securities representing membership interests in a limited liability company, will be accompanied by written, irrevocable consent of the limited liability company and , if required by the operating agreement, the members that any assignee of such Pledged Securities shall be admitted as a member of such limited liability company immediately upon such Pledged Securities being assigned to such assignee.

Section 3.03 Maintenance of Perfected Security Interest. Each Grantor represents and warrants that on the date hereof all financing statements, agreements, instruments and other documents necessary to perfect the security interest granted by it to the Secured Party in respect of the Pledged Collateral have been delivered to the Secured Party in completed and, to the extent necessary, duly executed form for filing in each governmental, municipal or other office. Each Grantor agrees that, at its sole cost and expense, such Grantor will maintain the security interest created by this Agreement in the Pledged Collateral as a perfected first priority security interest, subject only to the Permitted Liens.

Section 3.04 Further Assurances .

(a) Further Assurances. Each Grantor shall take such further actions, and execute and/or deliver to the Secured Party such additional financing statements, amendments, assignments, agreements, supplements, powers and instruments, as the Secured Party may in its reasonable judgment deem necessary in order to create and/or maintain the validity, perfection or priority of and protect any security interest granted or purported to be granted in the Pledged Collateral as provided herein and the rights and interests granted to the Secured Party hereunder, and enable the Secured Party to exercise and enforce its rights, powers and remedies hereunder with respect to any Pledged Collateral, including the filing of any financing statements, continuation statements and other documents under the UCC (or other similar laws) in effect in any jurisdiction with respect to the security interest created hereby, all in form reasonably satisfactory to the Secured Party and in such offices wherever required by law to perfect, continue and maintain the validity, enforceability and priority of the security interest in the Pledged Collateral as provided herein and to preserve the other rights and interests granted to the Secured Party hereunder, as against third parties, with respect to the Pledged Collateral. Without limiting the generality of the foregoing, but subject to applicable law, each Grantor shall make, execute, endorse, acknowledge, file or refile and/or deliver to the Secured Party from time to time upon request by the Secured Party such lists, schedules, descriptions and designations of the Pledged Collateral, statements, copies of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, supplements, additional security agreements, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments as the Secured Party shall reasonably request. If an Event of Default has occurred and is continuing, the Secured Party may institute and maintain, in its own name or in the name of any Grantor, such suits and proceedings as the Secured Party may deem necessary or expedient to prevent any impairment of the security interest in or the perfection thereof in the Pledged Collateral. All of the foregoing shall be at the sole cost and expense of the Grantors.

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Article IV
Representations, warranties and covenants

Each Grantor represents, warrants and covenants as follows:

Section 4.03 Representations .

(a) Note Purchase Agreement Representations. Each Grantor makes the representations and warranties set forth in Section 7.1 of the Note Purchase Agreement as they relate to the Grantors or to the Loan Documents to which any Grantor is a party, each of which is hereby incorporated herein by reference, and the Secured Party shall be entitled to rely on each of them as if they were fully set forth herein, provided that each reference in each such representation and warranty to the Borrower’s knowledge shall, for the purposes of this Section 4.01, be deemed to be a reference to the Grantors’ knowledge.

(b) Enforceability. This Agreement constitutes when delivered hereunder will constitute, a legal, valid and binding obligation of each Grantor thereto, enforceable against each such Grantor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or creditor rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

(c) No Contravention. The execution, delivery and performance of this Agreement will not violate any applicable law or any contractual obligation of any Grantor and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or assets pursuant to any applicable law or any such contractual obligation (other than the Liens created by the Loan Documents).

Section 4.04 Ownership of Property; No Other Liens .

(a) Each Grantor has fee simple title to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its Pledged Collateral, and none of such property is subject to any Lien, except for the security interest granted to the Secured Party hereunder and the Permitted Liens. No Person other than the Secured Party has control or possession of all or any part of the Pledged Collateral, except as permitted by the Note Purchase Agreement

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(b) None of the Pledged Collateral constitutes, or is the Proceeds of (i) farm products, (iii) manufactured momes, (iv) health-care-insurance receivables, (v) timber to be cut, (vi) aircraft, aircraft engines, satellites, ships or railroad rolling stock.

Section 4.05 Perfected Security Interest. This Agreement is effective to create in favor of the Secured Party a legal, valid and enforceable security interest in the Pledged Collateral and the Proceeds thereof. In the case of the certificated Pledged Securities, when stock certificates representing such Pledged Securities are delivered to the Secured Party and in the case of the other Pledged Collateral, when financing statements and other filings specified on Schedule III in appropriate form are filed in the offices specified on Schedule III and other actions described in Schedule III are taken, this Agreement shall constitute, and will at all times constitute, a fully perfected first priority Lien on, and security interest in, all rights, title and interest of the Grantors in such Pledged Collateral and the Proceeds thereof, as security for the Secured Obligations, subject only to the Permitted Liens.

Section 4.06 No Transfer of Pledged Collateral. No Grantor shall sell, offer to sell, dispose of, convey, assign or otherwise transfer, or grant any option with respect to, restrict, or grant, create, permit or suffer to exist any Lien on, any of the Pledged Collateral pledged by it hereunder or any interest therein, except for any Permitted Lien.

Section 4.07 Claims Against Pledged Collateral. Each Grantor shall, at its own cost and expense, defend title to the Pledged Collateral and the security interest and Lien granted to the Secured Party with respect thereto against all claims and demands of all Persons at any time claiming any interest therein materially adverse to the Secured Party other than Permitted Liens. Except as expressly permitted by the Note Purchase Agreement or any other Loan Document, there is no agreement, order, judgment or decree, and no Grantor shall enter into any agreement or take any other action, that could reasonably be expected to restrict the transferability of any of the Pledged Collateral or otherwise impair or conflict with such Grantors’ obligations or the rights of the Secured Party hereunder.

Section 4.08 Other Financing Statements. Such Grantor has not executed, filed, nor authorized any third party to file any financing statement or other instrument similar in effect covering all or any part of the Pledged Collateral or listing such Grantor as debtor in any recording office, except for financing statements and other instruments that were filed in favor of the Secured Party pursuant to this Agreement or in respect of any Permitted Lien. No Grantor shall execute, authorize or permit to be filed in any recording office any financing statement or other instrument similar in effect covering all or any part of the Pledged Collateral or listing such Grantor as debtor with respect to all or any part of the Pledged Collateral, except financing statements and other instruments filed in respect of Permitted Liens.

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Section 4.09 Changes in Name, Jurisdiction of Organization, Etc. On the date hereof, such Grantor’s type of organization, jurisdiction of organization, legal name, Federal Taxpayer Identification Number and chief executive office or principal place of business are indicated next to its name in Schedule IV . Schedule IV also lists all of such Grantor’s jurisdictions and types or organization, legal names and locations of chief executive office or principal place of business at any time during the four (4) months preceding the date hereof, if different from those referred to in the preceding sentence. Such Grantor shall not, except upon not less than thirty (30) days’ prior written notice to the Secured Party, and delivery to the Secured Party of all additional financing statements, information and other documents reasonably requested by the Secured Party to maintain the validity, perfection and priority of the security interests provided for herein:

(a) change its legal name, identity, type of organization or corporate structure;

(b) change the location of its chief executive office or its principal place of business;

(d) change its jurisdiction of organization (in each case, including by merging with or into any other entity, reorganizing, organizing, dissolving, liquidating, reincorporating or incorporating in any other jurisdiction).

Such Grantor shall, prior to any change described in the preceding sentence, take all actions reasonably requested by the Secured Party to maintain the perfection and priority of the security interest of the Secured Party in the Pledged Collateral intended to be granted hereunder.

Each Grantor agrees to promptly provide the Secured Party with certified Organizational Documents reflecting any of the changes described in this Section 4.09. Each Grantor also agrees to promptly notify the Secured Party of any change in the location of any office in which it maintains books or records relating to Pledged Collateral owned by it or any office or facility at which Pledged Collateral is located (including the establishment of any such new office or facility).

Section 4.10 Location of Inventory and Equipment. On the date hereof, the material Inventory and the material Equipment (other than mobile goods and goods in transit) of such Grantor are kept at locations listed in Schedule IV . Schedule IV also lists the locations of such Grantor’s material Inventory and the material Equipment (other than mobile goods and goods in transit) for the four (4) months preceding the date hereof, if different from those referred in the preceding sentence.

Such Grantor shall not move any Equipment or Inventory to any location, other any location that is listed in Schedule IV except upon not less than thirty (30) days’ prior written notice to the Secured Party, describing such new location and providing such other information and documents to the Secured Party reasonably requested by the Secured Party to maintain the validity, perfection and priority of the security interests provided for herein. Such Grantor shall, prior to any change described in the preceding sentence, take all actions reasonably requested by the Secured Party to maintain the perfection and priority of the security interest of the Secured Party in the Pledged Collateral.

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Section 4.11 Pledged Securities and Pledged Debt. Schedule II sets forth a complete and accurate list of all Pledged Securities and Pledged Debt held by such Grantor as of the date hereof. The Pledged Securities pledged by such Grantor hereunder constitute all of the issued and outstanding Equity Interests of each issuer owned by such Grantor. All of the Pledged Securities existing on the date hereof have been, and to the extent any Pledged Securities are hereafter issued, such Pledged Securities will be, upon such issuance, duly authorized, validly issued, fully paid and non-assessable. There is no amount or other obligation owing by any Grantor to any issuer of the Pledged Securities in exchange for or in connection with the issuance of the Pledged Securities or any Grantor’s status as a partner or a member of any issuer of the Pledged Securities. No Grantor is in default or violation of any provisions of any agreement to which such Grantor is a party relating to the Pledged Securities.

All of the Pledged Debt described on Schedule II has been duly authorized, authenticated or issued, and delivered and is the legal, valid and binding obligation of the issuers thereof, enforceable in accordance with their respective terms (subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding in equity or at law)) and is not in default. The Pledged Debt constitutes all of the issued and outstanding intercompany indebtedness owing to such Grantor and if evidenced by promissory notes, such notes have been delivered to the Secured Party.

No Securities Collateral pledged by such Grantor is subject to any defense, offset or counterclaim, nor have any of the foregoing been asserted or alleged against such Grantor by any Person with respect thereto, and there are no certificates, instruments, documents or other writings (other than the Organizational Documents and certificates representing such Pledged Securities or Pledged Debt, if any, that have been delivered to the Secured Party) which evidence any Pledged Securities or Pledged Debt of such Grantor.

In the case of a limited liability company the membership interests of which are Pledged Securities, neither the certificate of formation nor the limited liability company agreement (sometimes referred to as an operating agreement) precludes as assignee of such Pledged Securities from immediately becoming a member of such limited liability company upon becoming an assignee of such Pledged Securities.

Each Grantor shall, upon obtaining any Pledged Securities or Pledged Debt of any Person, accept the same in trust for the benefit of the Secured Party and promptly (but in any event within five (5) Business Days after receipt thereof) deliver to the Secured Party an updated Schedule II , and the certificates and other documents required under Section 3.01 and Section 3.02 hereof in respect of the additional Pledged Securities or Pledged Debt which are to be pledged pursuant to this Agreement, and confirming the Lien hereby created on such additional Pledged Securities or Pledged Debt.

Section 4.12 Approvals. In the event that the Secured Party desires to exercise any remedies, voting or consensual rights or attorney-in-fact powers set forth in this Agreement and determines it necessary to obtain any approvals or consents of any Governmental Authority or any other Person therefor, then, upon the reasonable request of the Secured Party, such Grantor agrees to assist the Secured Party in obtaining as soon as reasonably practicable any necessary approvals or consents for the exercise of any such remedies, rights and powers.

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Section 4.13 Pledged Collateral Information. All information set forth herein, including the Schedules, and all information contained in any documents, Schedules and lists heretofore delivered to the Secured Party in connection with this Agreement, in each case, relating to the Pledged Collateral, is accurate and complete. The Pledged Collateral described on the Schedules constitutes all of the property of such type of Pledged Collateral owned or held by the Grantors.

Section 4.14 Insurance. In the event that the proceeds of any insurance claim are paid to any Grantor after the Secured Party has exercised its right to foreclose on all or any part of the Pledged Collateral during the existence of an Event of Default, such Net Cash Proceeds shall be held in trust for the benefit of the Secured Party and immediately after receipt thereof shall be paid to the Secured Party for application in accordance with the Note Purchase Agreement.

Section 4.15 Intellectual Property. (a) Schedule I lists all Copyrights, Patents, Trademarks and Intellectual Property Licenses owned by such Grantor; (b) all Intellectual Property Collateral is valid, subsisting, unexpired and enforceable and has not been abandoned; (c) except as described on Schedule I , such Grantor is the exclusive owner of all right, title and interest in and to, or has the right to use, all such Intellectual Property Collateral; (d) consummation and performance of this Agreement will not result in the invalidity, unenforceability or impairment of any such Intellectual Property Collateral, or in default or termination of any material Intellectual Property License; (e) except as described on Schedule I , there are no outstanding holdings, decisions, consents, settlements, decrees, orders, injunctions, rulings or judgments that would limit, cancel or question the validity or enforceability of any such Intellectual Property Collateral or such Grantor’s rights therein or use thereof; (f) to such Grantor’s knowledge, except as described on Schedule I , the operation of such Grantor’s business and such Grantor’s use of Intellectual Property Collateral in connection therewith, does not infringe or misappropriate the intellectual property rights of any other Person; and (g) except as described in Schedule I , no action or proceeding is pending or, to such Grantor’s knowledge, threatened (i) seeking to limit, cancel or question the validity of any Intellectual Property Collateral or such Grantor’s ownership interest or rights therein, or (ii) alleging that any such Intellectual Property Collateral, or such Grantor’s use thereof in the operation of its business, infringes or misappropriates the intellectual property rights of any Person.

Section 4.16 Inspection of Pledged Collateral. Each Grantor shall keep the Pledged Collateral in good order and repair and shall not use the same in violation of law or any policy of insurance thereon. Each Grantor shall permit the Secured Party or any of its designees to inspect the Pledged Collateral at any reasonable time, wherever located.

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Article V
Remedies

Section 5.01 Remedies .

(a) If any Event of Default shall have occurred and be continuing, the Secured Party may exercise, without any other notice to or demand upon any Grantor, in addition to the other rights and remedies provided for herein or in any other Loan Document or otherwise available to it, all the rights and remedies of a secured party upon default under the UCC (whether or not the UCC applies to the affected Pledged Collateral) and also may:

(i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Secured Party immediately, assemble the Pledged Collateral or any part thereof, as directed by the Secured Party and make it available to the Secured Party at a place and time to be designated by the Secured Party;

(ii) without notice except as specified below, sell, resell, assign and deliver or grant a license to use or otherwise dispose of the Pledged Collateral or any part thereof, in one or more parcels at public or private sale, at any of the Secured Party’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Secured Party may deem commercially reasonable;

(iii) occupy any premises owned or leased by any of the Grantors where the Pledged Collateral or any part thereof is assembled or located for a reasonable period in order to effectuate its rights and remedies hereunder or under law, without obligation to such Grantor in respect of such occupation; and

(iv) exercise any and all rights and remedies of any of the Grantors under or in connection with the Pledged Collateral.

(b) Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ notice to such Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against the Secured Party arising out of the exercise by it of any rights hereunder. Each Grantor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Pledged Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Pledged Collateral and any other security for the Secured Obligations or otherwise. The Secured Party shall not be liable for failure to collect or realize upon any or all of the Pledged Collateral or for any delay in so doing nor shall it be under any obligation to take any action with regard thereto. The Secured Party shall not be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Secured Party shall not be obligated to clean-up or otherwise prepare the Pledged Collateral for sale.

(c) If any Event of Default shall have occurred and be continuing, all payments received by any Grantor in respect of the Pledged Collateral shall be received in trust for the benefit of the Secured Party, shall be segregated from other funds of such Grantor and shall be forthwith paid over the Secured Party in the same form as so received (with any necessary endorsement).

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(d) If any Event of Default shall have occurred and be continuing, the Secured Party may, without notice to any Grantor except as required by law and at any time or from time to time, charge, set off and otherwise apply all or part of the Secured Obligations against any funds deposited with it or held by it.

(e) If any Event of Default shall have occurred and be continuing, upon the written demand of the Secured Party, each Grantor shall execute and deliver to the Secured Party an assignment or assignments of any or all of the Intellectual Property Collateral and such other documents and take such other actions as are necessary to carry out the intent and purposes hereof. Within five (5) Business Days of written notice thereafter from the Secured Party, each Grantor shall make available to the Secured Party, to the extent within such Grantor’s power and authority, such personnel in such Grantor’s employ on the date of the Event of Default as the Secured Party may reasonably designate to permit such Grantor to continue, directly or indirectly, to produce, advertise and sell the products and services sold by such Grantor under the Intellectual Property Collateral, and such persons shall be available to perform their prior functions on the Secured Party’s behalf.

(f) If the Secured Party shall determine to exercise its right to sell all or any of the Securities Collateral of any Grantor pursuant to this Section 5.01, each Grantor agrees that, upon request of the Secured Party, such Grantor will, at its own expense:

(i) provide the Secured Party with such information and projections as may be necessary to enable the Secured Party to effect the sale of such Securities Collateral; and

(ii) do or cause to be done all such other acts and things as may be necessary to make such sale of such Securities Collateral or any part thereof valid and binding and in compliance with applicable law.

(g) The Secured Party is authorized, in connection with any sale of the Securities Collateral pursuant to this Section 5.01, to deliver or otherwise disclose to any prospective purchaser of the Securities Collateral any information in its possession relating to such Securities Collateral.

Section 5.02 No Waiver and Cumulative Remedies. No failure on the part of the Secured Party to exercise, no course of dealing with respect to, and no delay on the part of the Secured Party in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power, privilege or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power, privilege or remedy; nor shall the Secured Party be required to look first to, enforce or exhaust any other security, collateral or guaranties. All rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies provided by law.

Section 5.03 Application of Proceeds. Upon the exercise by the Secured Party of its remedies hereunder, any proceeds received by the Secured Party in respect of any realization upon any Pledged Collateral shall be applied, together with any other sums then held by the Secured Party pursuant to this Agreement, in accordance with the Note Purchase Agreement. Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Pledged Collateral are insufficient to pay the Secured Obligations and the fees and other charges of any attorneys employed by the Secured Party to collect such deficiency.

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Article VI
MISCELLANEOUS

Section 6.01 Performance By Secured Party. If any Grantor shall fail to perform any covenants contained in this Agreement after giving effect to all applicable grace periods (including covenants to pay insurance, taxes and claims arising by operation of law in respect of the Pledged Collateral and to pay or perform any Grantor obligations under any Pledged Collateral) or if any representation or warranty on the part of any Grantor contained herein shall be breached, the Secured Party may (but shall not be obligated to) during the existence of an Event of Default do the same or cause it to be done or remedy any such breach, and may make payments for such purpose; provided, however , that the Secured Party shall in no event be bound to inquire into the validity of any tax, Lien, imposition or other obligation which such Grantor fails to pay or perform as and when required hereby and which such Grantor does not contest in accordance with the provisions of the Note Purchase Agreement. Any and all amounts so paid by the Secured Party shall be reimbursed by the Grantors in accordance with the provisions of Section 6.07. Neither the provisions of this Section 6.01 nor any action taken by the Secured Party pursuant to the provisions of this Section 6.01 shall prevent any such failure to observe any covenant contained in this Agreement nor any breach of representation or warranty from constituting an Event of Default.

Section 6.02 Power of Attorney. Each Grantor hereby appoints the Secured Party its attorney-in-fact, with full power and authority in the place and stead of such Grantor and in the name of such Grantor, or otherwise, from time to time during the existence of an Event of Default in the Secured Party’s discretion to take any action and to execute any instrument consistent with the terms of the Note Purchase Agreement and the other Loan Documents which the Secured Party may deem necessary or advisable to accomplish the purposes hereof (but the Secured Party shall not be obligated to and shall have no liability to such Grantor or any third party for failure to so do or take action). The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. Each Grantor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof.

Without limiting the previous paragraph, each Grantor hereby appoints the Secured Party its attorney-in-fact, with full power and authority in the place and stead of such Grantor and in the name of such Grantor, or otherwise, from time to time during the existence of an Event of Default in the Secured Party’s discretion to take any action and to execute any instrument relating to Grantor’s voting and other rights with respect to such Grantor’s membership interests in any limited liability company, the membership interests in which are Pledged Securities, including, but not limited to, an instrument approving the admission of any assignee of such Pledge Securities as a member in such limited liability company.

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Section 6.03 Continuing Security Interest and Assignment

. This Agreement shall create a continuing security interest in the Pledged Collateral and shall (a) be binding upon the Grantors, their respective successors and assigns and (b) inure to the benefit of the Secured Party and its permitted successors, transferees and assigns and its officers, directors, employees, affiliates, agents, advisors and controlling Persons; provided that , that no Grantor shall assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the Secured Party and any attempted assignment or transfer without such consent shall be null and void. Without limiting the generality of the foregoing clause (b), the Secured Party may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Secured Party, herein or otherwise, subject however, to the provisions of the Note Purchase Agreement.

Section 6.04 Termination. At such time as the Notes and the other Secured Obligations shall have been paid in full (other than contingent indemnification obligations in which no claim has been made or is reasonably foreseeable), the Pledged Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Secured Party and each Grantor hereunder shall terminate, all without delivery of any instrument or any further action by any party, and all rights to the Pledged Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, the Secured Party shall deliver to such Grantor any Pledged Collateral held by the Secured Party hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.

Section 6.05 Modification in Writing. None of the terms or provisions of this Agreement may be amended, modified, supplemented, terminated or waived, and no consent to any departure by any Grantor therefrom shall be effective, except by a written instrument signed by the Secured Party in accordance with the terms of the Note Purchase Agreement. Any amendment, modification or supplement of any provision hereof, any waiver of any provision hereof and any consent to any departure by any Grantor from the terms of any provision hereof in each case shall be effective only in the specific instance and for the specific purpose for which made or given. This Agreement shall be construed as a separate agreement with respect to each Grantor and may be amended, modified, supplemented, terminated or waived with respect to any Grantor without the approval of any other Grantor and without affecting the obligations of any other Grantor hereunder.

Section 6.06 Notices. Unless otherwise provided herein, any notice or other communication required or permitted to be given under this Agreement shall be in writing and shall be given in the manner and become effective as set forth in the Note Purchase Agreement.

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Section 6.07 Indemnity and Expenses .

(a) Each Grantor hereby agrees to indemnify and hold harmless the Secured Party and its Affiliates and the directors, officers, employees, partners, agents, trustees, administrators, managers, advisors and representatives (each, an “ Indemnitee ”) from any losses, damages, liabilities, claims and related expenses (including the fees and expenses of any counsel for any Indemnitee) incurred by any Indemnitee or asserted against any Indemnitee by any Person (including any Grantor) arising out of, in connection with or resulting from this Agreement (including the enforcement of this Agreement) or any failure of any Secured Obligations to be the legal, valid, and binding obligations of any Grantor enforceable against such Grantor in accordance with their terms, whether brought by a third party or by such Grantor; provided, however , that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (i) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (ii) result from a claim brought by any Grantor against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if such Grantor has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction.

(b) To the fullest extent permitted by applicable law, each Grantor hereby agrees not to assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any other Loan Document.

(c) Each Grantor agrees to pay or reimburse the Secured Party for all of its reasonable costs and expenses incurred in collecting against such Grantor its Secured Obligations or otherwise protecting, enforcing or preserving any rights or remedies under this Agreement and the other Loan Documents to which such Grantor is a party, including the fees and other charges of counsel to the Secured Party.

(d) All amounts due under this Section 6.07 shall be payable not later than ten (10) days after demand therefor, shall constitute Secured Obligations and shall bear interest until paid at a rate per annum equal to the highest rate per annum at which interest would then be payable on any past due Notes under the Note Purchase Agreement.

(e) Without prejudice to the survival of any other agreement of any Grantor under this Agreement or any other Loan Documents, the agreements and obligations of each Grantor contained in this Section shall survive termination of the Loan Documents and payment in full of the Obligations and all other amounts payable under this Agreement.

Section 6.08 Governing Law. This Agreement and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement and the transactions contemplated hereby shall be governed by, and construed in accordance with, the laws of the State of New York without regard principles of conflicts of laws.

Section 6.09 Severability of Provisions. Any provision hereof which is invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating the remaining provisions hereof or affecting the validity, legality or enforceability of such provision in any other jurisdiction.

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Section 6.10 Counterparts; Entire Agreement. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or in electronic format shall be effective as delivery of a manually executed counterpart of this Agreement. This Agreement and the other Loan Documents constitute the entire contract among the parties with respect to the subject matter hereof and supersede all previous agreements and understandings, oral or written, with respect thereto.

Section 6.11 No Release. Nothing set forth in this Agreement or any other Loan Document, nor the exercise by the Secured Party of any of the rights or remedies hereunder, shall relieve any Grantor from the performance of any term, covenant, condition or agreement on such Grantor’s part to be performed or observed in respect of any of the Pledged Collateral or from any liability to any Person in respect of any of the Pledged Collateral or shall impose any obligation on the Secured Party to perform or observe any such term, covenant, condition or agreement on such Grantor’s part to be so performed or observed or shall impose any liability on the Secured Party for any act or omission on the part of such Grantor relating thereto or for any breach of any representation or warranty on the part of such Grantor contained in this Agreement, the Note Purchase Agreement or the other Loan Documents, or in respect of the Pledged Collateral or made in connection herewith or therewith. Anything herein to the contrary notwithstanding, the Secured Party shall not have any obligation or liability under any contracts, agreements and other documents included in the Pledged Collateral by reason of this Agreement, nor shall the Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any such contract, agreement or other document included in the Pledged Collateral.

[Signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

	BORROWER:

Sworn to before me this 24th day	ARKADOS GROUP, INC.
of April, 2017

/s/ Lino M. Lopez	By:	/s/ Terrence DeFranco
Notary Public		Name: Terrence DeFranco
		Title: Chief Executive Officer

	GUARANTORS:

Sworn to before me this 24th day	ARKADOS, INC.
of April, 2017

/s/ Lino M. Lopez	By:	/s/ Terrence DeFranco
Notary Public		Name: Terrence DeFranco
		Title: Chief Executive Officer

Sworn to before me this 24th day	ARKADOS ENERGY SOLUTIONS, LLC
of April, 2017

/s/ Lino M. Lopez	By:	/s/ Terrence DeFranco
Notary Public		Name: Terrence DeFranco
		Title: Manager

	SECURED PARTY:

Sworn to before me this 24th day	AIP ASSET MANAGEMENT INC.
of April, 2017

/s/ Lino M. Lopez	By:	/s/ Jay Bala
Notary Public		Name: Jay Bala, CFA
		Title: President

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SCHEDULE I

COPYRIGHTS, INTELLECTUAL PROPERTY LICENSES, PATENTS AND TRADEMARKS

Trademarks

“Arkados” mark (U.S. Trademark Reg. No. 3257994 registered on July 3, 2007).

Domain Names

www.arkadosgroup.com

Logos

Tradenames

Arkados Group, Inc.

Arkados

Arkados, Inc.

Arkados Energy Solutions, LLC

AES

AKDS

License Agreements

None

The Company will be acquiring the following Intellectual Property pursuant to that certain Asset Purchase Agreement by and between the Company and SolBright Renewable Energy, LLC, a South Carolina limited liability company (“ SolBright ”), dated May 1, 2017 (“ Asset Purchase Agreement ”):

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Patents: None

Trademarks: None

Servicemarks: None

Logos:

Slogans: “The most dependable EPC in the industry”

Trade Names: SolBright; SolBright Renewable Energy

Corporate Names: SolBright Renewable Energy LLC

Website: www.solbrightre.com

Telephone Numbers: 843.535.8500

Copyrights: None

Computer Software: None

SolBright has various technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information and other documentation that it uses in its normal course of business, which may or may not be specific to any given project.

SolBright Contracts

Walmart Phase I, WalMart Phase II, Dellalio, Franklin/Cummington, Squirrel Island, CEPC Coastal Co-Op, Banks Solar Farm

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SCHEDULE II

PLEDGED SECURITIES AND PLEDGED DEBT

Arkados Group, Inc. owns the following Equity Interests:

1. 100 shares of Common Stock of Arkados, Inc.

2. 100 units of Arkados Energy Solutions, LLC

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SCHEDULE III

REQUIRED FILINGS AND ACTIONS

FINANCING STATEMENTS

Grantor		Filing Jurisdiction(s)
Arkados Group, Inc.		Delaware – Secretary of State
Arkados, Inc.		Delaware – Secretary of State
Arkados Energy Solutions, LLC		Delaware – Secretary of State

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SCHEDULE IV

INFORMATION CONCERNING GRANTOR AND LOCATIONS OF INVENTORY AND EQUIPMENT

Legal Name	Type of Organization and Jurisdiction	EIN	Chief Executive Officer	Address
Arkados Group, Inc.	Delaware Corporation	22-3586087	Terrence DeFranco	211 Warren Street, Suite 320, Newark, New Jersey
Arkados, Inc.	Delaware Corporation	04-3792860	Terrence DeFranco	211 Warren Street, Suite 320, Newark, New Jersey
Arkados Energy Solutions, LLC	Delaware Limited Liability Corporation	46-5569892	Terrence DeFranco	211 Warren Street, Suite 320, Newark, New Jersey America Safe and Sound Storage 1800 Prime Pl, Hauppauge, NY 11788

Pursuant to the Asset Purchase Agreement, the Company will be acquiring Equipment or Inventory located at SolBright’s principal place of business or projects sites.

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Exhibit 10.6

ARKADOS GROUP, INC.

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”), dated as of May 1, 2017, is entered into by and among Arkados Group, Inc., a Delaware corporation (the “ Company ”), the investors listed on the Schedule of Investors attached hereto and the investors, if any, party to a joinder agreement with respect hereto (each, an “ Investor ” and collectively, the “ Investors ”), in connection with the Note Purchase Agreement among the Company, the Investors and the Security Agent (as defined therein) dated May 1, 2017 (the “ Note Purchase Agreement ”). Capitalized terms not otherwise defined herein shall have the meaning ascribed to them in the Note Purchase Agreement.

WHEREAS:

A. In connection with the Note Purchase Agreement, the Company has agreed, upon the terms and subject to the conditions of the Note Purchase Agreement, to issue and sell to each Investor (i) senior secured convertible notes of the Company (the “ Notes ”), which will, among other things, be convertible into the Company’s common stock, par value $0.0001 per share (the “ Common Stock ”) (the shares of Common Stock issuable pursuant to the terms of the Notes, collectively, the “ Conversion Shares ”) and (ii) warrants (the “ Warrants ”) which will be exercisable to purchase shares of Common Stock (as exercised, collectively, the “ Warrant Shares ”) in accordance with the terms of the Warrants.

B. In accordance with the terms of the Note Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “ 1933 Act ”), and applicable state securities laws.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Investors hereby agree as follows:

1. Definitions .

Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Note Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

(a) “ Additional Effective Date ” means the date the Additional Registration Statement is declared effective by the SEC.

(b) “ Additional Effectiveness Deadline ” means the date which is (x) seventy-five (75) calendar days after the earlier of the Additional Filing Date and the Additional Filing Deadline and (y) the fifth (5 ^th ) Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Additional Registration Statement will not be reviewed or will not be subject to further review; provided , however , that if the Additional Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Additional Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open for business.

(d) “ Additional Filing Deadline ” means if Cutback Shares are required to be included in any Additional Registration Statement, the later of (i) the date sixty (60) days after the date substantially all of the Registrable Securities registered under the immediately preceding Registration Statement are sold and (ii) the date six (6) months from the Initial Effective Date or the most recent Additional Effective Date, as applicable.

(e) “ Additional Registrable Securities ” means, (i) any Cutback Shares not previously included on a Registration Statement and (ii) any capital stock of the Company issued or issuable with respect to the Notes, the Conversion Shares, the Warrants, the Warrant Shares, or the Cutback Shares, as applicable, as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitations on conversion and/or redemption of the Notes or exercise of the Warrants.

(f) “ Additional Registration Statement ” means a registration statement or registration statements of the Company filed under the 1933 Act covering the resale of any Additional Registrable Securities.

(g) “ Additional Required Registration Amount ” means (I) any Cutback Shares not previously included on a Registration Statement, all subject to adjustment as provided in Section 2(f) or (II) such other amount as may be permitted by the staff of the SEC pursuant to Rule 415, in each case without regard to any limitations on conversion and/or redemption of the Notes or exercise of the Warrants.

(h) “ Business Day ” means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York are authorized or required by law to remain closed.

(n) “ Closing Date ” shall have the meaning set forth in the Note Purchase Agreement.

(i) “ Cutback Shares ” means any of the Initial Required Registration Amount or the Additional Required Registration Amount (without regard to clause (II) in the definition thereof) of Registrable Securities not included in all Registration Statements previously declared effective hereunder as a result of a limitation on the maximum number of shares of Common Stock of the Company permitted to be registered by the staff of the SEC pursuant to Rule 415. For the purpose of determining the Cutback Shares, in order to determine any applicable Required Registration Amount, subject to the immediately preceding clause (i), unless an Investor gives written notice to the Company to the contrary with respect to the allocation of its Cutback Shares, first the Warrant Shares shall be excluded on a pro rata basis among the Investors until all of the Warrant Shares have been excluded, and second the Conversion Shares shall be excluded on a pro rata basis among the Investors until all of the Conversion Shares have been excluded.

(j) “ Effective Date ” means the Initial Effective Date and the Additional Effective Date, as applicable.

(k) “ Effectiveness Deadline ” means the Initial Effectiveness Deadline and the Additional Effectiveness Deadline, as applicable.

(l) “ Eligible Market ” means The New York Stock Exchange, Inc., the NYSE MKT LLC, The NASDAQ Capital Market, The NASDAQ Global Select Market or The NASDAQ Global Market or, on or prior to December 31, 2017, the Principal Market.

(m) “ Filing Deadline ” means the Initial Filing Deadline and the Additional Filing Deadline, as applicable.

(o) “ Initial Effective Date ” means the date that the Initial Registration Statement has been declared effective by the SEC.

(p) “ Initial Effectiveness Deadline ” means the date which is one-hundred twenty (120) calendar days after the Closing Date; provided , however , that if the Initial Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Initial Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open for business.

(q) “ Initial Filing Date ” means the date on which the Initial Registration Statement is filed with the SEC.

(r) “ Initial Filing Deadline ” means the date which is seventy-five (75) calendar days after the Closing Date.

(s) “ Initial Registrable Securities ” means (i) the Conversion Shares issued or issuable pursuant to the terms of the Notes, (ii) the Warrant Shares issued or issuable upon exercise of the Warrants and (iii) any capital stock of the Company issued or issuable with respect to the Notes, the Conversion Shares, the Warrant Shares or the Warrants as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, in each case without regard to any limitations on conversion and/or redemption of the Notes or exercise of the Warrants.

(t) “ Initial Registration Statement ” means a registration statement or registration statements of the Company filed under the 1933 Act covering the resale of the Initial Registrable Securities.

(u) “ Initial Required Registration Amount ” means (I) the sum of (i) the maximum number of Conversion Shares issued and issuable pursuant to the Notes and (ii) the maximum number of Warrant Shares issued and issuable pursuant to the Warrants, each as of the Trading Day immediately preceding the applicable date of determination and all subject to adjustment as provided in Section 2(f), without regard to any limitations on conversion and/or redemption of the Notes or exercise of the Warrants or (II) such other amount as may be permitted by the staff of the SEC pursuant to Rule 415.

(v) “ Investor ” means an Investor or any transferee or assignee thereof to whom an Investor assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9.

(x) “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

(y) “ Principal Market ” means The OTCQB.

(z) “ register ,” “ registered ,” and “ registration ” refer to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the 1933 Act and pursuant to Rule 415, and the declaration or ordering of effectiveness of such Registration Statement(s) by the SEC.

(aa) “ Registrable Securities ” means the Initial Registrable Securities and the Additional Registrable Securities.

(bb) “ Registration Statement ” means the Initial Registration Statement and the Additional Registration Statement, as applicable.

(cc) “ Required Holders ” means the holders of at least a majority of the Registrable Securities.

(dd) “ Required Registration Amount ” means either the Initial Required Registration Amount or the Additional Required Registration Amount, as applicable.

(ee) “ Rule 415 ” means Rule 415 promulgated under the 1933 Act or any successor rule providing for offering securities on a continuous or delayed basis.

(ff) “ SEC ” means the United States Securities and Exchange Commission.

(hh) “ Trading Day ” means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded.

2. Registration .

(a) Initial Registration . Promptly following the Closing Date, the Company shall use its reasonable best efforts to prepare, and, as soon as practicable but in no event later than the Initial Filing Deadline, file with the SEC the Initial Registration Statement on Form S-3 covering the resale of all of the Initial Registrable Securities. In the event that Form S-3 is unavailable for such a registration, the Company shall use Form S-1 or such other form as is available for such a registration on another appropriate form reasonably acceptable to the Required Holders, subject to the provisions of Section 2(e). The Initial Registration Statement prepared pursuant hereto shall register for resale at least the number of shares of Common Stock equal to the Initial Required Registration Amount determined as of the date the Initial Registration Statement is initially filed with the SEC, subject to adjustment as provided in Section 2(f). The Initial Registration Statement shall contain (except if otherwise directed by the Required Holders) the “ Plan of Distribution ” and “ Selling Stockholders ” sections in substantially the form attached hereto as Exhibit B . The Company shall use its reasonable best efforts to have the Initial Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Initial Effectiveness Deadline. By 9:30 a.m. New York time on the second Business Day following the Initial Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Initial Registration Statement. Notwithstanding any of the foregoing obligations, if the Company furnishes to the Security Agent after such request for registration, a certificate signed by the Company’s Chief Executive Officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such Initial Registration Statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, then the Company shall have the right to defer taking action with respect to such filing for a period of not more than one hundred fifty (150) days after the request of Security Agent is given (such deferral period, the “ Initial Deferral Period ”).

(b) Additional Registrations . The Company shall use its reasonable best efforts prepare, and, as soon as practicable but in no event later than the Additional Filing Deadline, file with the SEC an Additional Registration Statement on Form S-3, provided that form S-3 is available to the Company for such a registration, covering the resale of all of the Additional Registrable Securities not previously registered on an Additional Registration Statement hereunder. To the extent the staff of the SEC does not permit the Additional Required Registration Amount to be registered on an Additional Registration Statement, the Company shall file Additional Registration Statements successively trying to register on each such Additional Registration Statement the maximum number of remaining Additional Registrable Securities until the Additional Required Registration Amount has been registered with the SEC. In the event that Form S-3 is unavailable for such a registration, the Company shall use Form S-1 or such other form as is available for such a registration on another appropriate form reasonably acceptable to the Required Holders, subject to the provisions of Section 2(e). Each Additional Registration Statement prepared pursuant hereto shall register for resale at least that number of shares of Common Stock equal to the Additional Required Registration Amount determined as of the date such Additional Registration Statement is initially filed with the SEC, subject to adjustment as provided in Section 2(f). Each Additional Registration Statement shall contain (except if otherwise directed by the Required Holders) the “ Plan of Distribution ” and “ Selling Stockholders ” sections in substantially the form attached hereto as Exhibit B . The Company shall use its reasonable best efforts to have each Additional Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Additional Effectiveness Deadline. By 9:30 a.m. New York time on the second Business Day following the Additional Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Additional Registration Statement. Notwithstanding any of the foregoing obligations, if the Company furnishes to the Security Agent a certificate signed by the Company’s Chief Executive Officer stating that in the good faith judgment of the Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such Additional Registration Statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, then the Company shall have the right to defer taking action with respect to such filing for a period of not more than one hundred fifty (150) days after the request of Security Agent is given (such deferral period, the “ Additional Deferral Period ” and, together with the Initial Deferral Period, a “ Deferral Period ”).

(c) Allocation of Registrable Securities . The initial number of Registrable Securities included in any Registration Statement and any increase or decrease in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on the number of Registrable Securities held by each Investor at the time the Registration Statement covering such initial number of Registrable Securities or increase or decrease thereof is declared effective by the SEC. In the event that an Investor sells or otherwise transfers any of such Investor’s Registrable Securities, each transferee shall be allocated a pro rata portion of the then remaining number of Registrable Securities included in such Registration Statement for such transferor. Any shares of Common Stock included in a Registration Statement and which remain allocated to any Person which ceases to hold any Registrable Securities covered by such Registration Statement shall be allocated to the remaining Investors, pro rata based on the number of Registrable Securities then held by such Investors which are covered by such Registration Statement. In no event shall the Company include any securities other than Registrable Securities on any Registration Statement without the prior written consent of the Required Holders.

(e) Ineligibility for Form S-3 . In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on Form S-1 or another appropriate form reasonably acceptable to the Required Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the SEC.

(f) Sufficient Number of Shares Registered . In the event the number of shares available under a Registration Statement filed pursuant to Section 2(a) or Section 2(b) is insufficient to cover the Required Registration Amount of Registrable Securities required to be covered by such Registration Statement or an Investor’s allocated portion of the Registrable Securities pursuant to Section 2(c), the Company shall amend the applicable Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover at least the Required Registration Amount as of the Trading Day immediately preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event not later than fifteen (15) days after the necessity therefor arises. The Company shall use its reasonable best efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof. For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed “insufficient to cover all of the Registrable Securities” if at any time the number of shares of Common Stock available for resale under the Registration Statement is less than the Required Registration Amount. The calculation set forth in the foregoing sentence shall be made without regard to any limitations on the conversion and/or redemption of the Notes or exercise of the Warrants and such calculation shall assume (i) that the Notes are then convertible in full into shares of Common Stock at the then prevailing Conversion Rate (as defined in the Notes) (ii) the initial outstanding principal amount of the Notes remains outstanding through the scheduled Maturity Date (as defined in the Notes) and no redemptions of the Notes occur prior to the scheduled Maturity Date and (iii) the Warrants are then exercisable in full into shares of Common Stock at the then prevailing Exercise Price (as defined in the Warrants).

(g) Effect of Failure to File and Obtain and Maintain Effectiveness of Registration Statement . If (i) the Initial Registration Statement when declared effective fails to register the Initial Required Registration Amount of Initial Registrable Securities (a “ Registration Failure ”), (ii) a Registration Statement covering all of the Registrable Securities required to be covered thereby and required to be filed by the Company pursuant to this Agreement is not declared effective by the SEC on or before the applicable Effectiveness Deadline (subject to any applicable Deferral Period), (an “ Effectiveness Failure ”) or (iii) on any day after the applicable Effective Date, sales of all of the Registrable Securities required to be included on such Registration Statement cannot be made (other than during an Allowable Grace Period or Deferral Period) pursuant to such Registration Statement or otherwise (including, without limitation, because of the suspension of trading or any other limitation imposed by an Eligible Market, a failure to keep such Registration Statement effective, a failure to disclose such information as is necessary for sales to be made pursuant to such Registration Statement, a failure to register a sufficient number of shares of Common Stock or a failure to maintain the listing of the Common Stock) (a “ Maintenance Failure ”) then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell the underlying shares of Common Stock (which remedy shall not be exclusive of any other remedies available at law or in equity, including, without limitation, specific performance or the additional obligation of the Company to register any Cutback Shares), the Company shall pay to the Security Agent on behalf each holder of Registrable Securities relating to such Registration Statement an amount in cash equal to one percent (1.0%) of the aggregate outstanding principal amount of the Notes of such Investor’s Registrable Securities, whether or not included in such Registration Statement, on each of the following dates: (i) on the thirtieth (30 ^th ) day after the date of a Registration Failure, Effectiveness Failure or Maintenance Failure, as applicable, and every thirtieth (30 ^th ) day thereafter (pro rated for periods totaling less than thirty (30) days) until such Registration Failure, Effectiveness Failure or Maintenance Failure, as applicable, is cured. The payments to which a holder shall be entitled pursuant to this Section 2(g) are referred to herein as “Registration Delay Payments.” Registration Delay Payments shall be paid on the earlier of (I) the dates set forth above and (II) the third Business Day after the event or failure giving rise to the Registration Delay Payments is cured. Notwithstanding anything to the contrary contained herein, Registration Delay Payments shall (i) not, in the aggregate, exceed two (2.0%) of the aggregate outstanding principal amount of the Notes and (ii) cease to accrue after the Registration Period (as defined below).

3. Related Obligations . At such time as the Company is obligated to file a Registration Statement with the SEC pursuant to Section 2(a), 2(b), 2(e) or 2(f), the Company will use its reasonable best efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

(a) The Company shall promptly prepare and file with the SEC a Registration Statement with respect to the Registrable Securities and use commercially reasonable efforts to cause such Registration Statement relating to the Registrable Securities to become effective as soon as practicable after such filing (but in no event later than the Effectiveness Deadline). The Company shall keep each Registration Statement effective pursuant to Rule 415 until the earliest of (i) the date as of which the Investors may sell all of the Registrable Securities covered by such Registration Statement without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act, (ii) the one year anniversary of the Closing Date, (iii) the date on which the Investors shall have sold all of the Registrable Securities covered by such Registration Statement, (iv) the exercise of the Warrants and the conversion of the Notes and (v) the full satisfaction of all of the Notes (the “ Registration Period ”). The Company shall ensure that each Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading.

(b) The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-K, Form 10-Q, Form 8-K or any analogous report under the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”), the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the 1934 Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.

(c)

(d) The Company shall furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge, (i) promptly after the same is prepared and filed with the SEC, at least one copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, all exhibits and each preliminary prospectus, and (iii) such other documents, including copies of any preliminary or final prospectus, as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.

(e) The Company shall use its commercially reasonable efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

(f) The Company shall notify each Investor in writing of the happening of any event, as promptly as practicable after becoming aware of such event, but in any event on the same Trading Day as the Company becomes aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and, subject to Section 3(r), promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission.. The Company shall also promptly notify Legal Counsel and each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to each Investor by facsimile or email on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. By 9:30 a.m. New York City time on the date following the date any post-effective amendment has become effective, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Registration Statement.

(g) The Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify each Investor who holds Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

(h) If any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter, at the reasonable request of such Investor, the Company shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the Company’s independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investors.

(i) If any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter the Company shall make available for inspection by (i) such Investor and (ii) one firm of accountants or other agents retained by the Investors (collectively, the “ Inspectors ”), all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the “ Records ”), as shall be reasonably deemed necessary by each Inspector, and cause the Company’s officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, that each Inspector shall agree to hold in strict confidence and shall not make any disclosure (except to an Investor) or use of any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this Agreement. Each Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential. Nothing herein (or in any other confidentiality agreement between the Company and any Investor) shall be deemed to limit the Investors’ ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.

(j) The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at the Investor’s sole cost and expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

(k) The Company shall use its best efforts either to (i) cause all of the Registrable Securities covered by a Registration Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or (ii) secure the inclusion for quotation of all of the Registrable Securities on The Principal Market or (iii) if, despite the Company’s best efforts, the Company is unsuccessful in satisfying the preceding clauses (i) and (ii), to secure the inclusion for quotation on another Eligible Market for such Registrable Securities and, without limiting the generality of the foregoing, to use its best efforts to arrange for at least two market makers to register with the Financial Industry Regulatory Authority, Inc. (“ FINRA ”) as such with respect to such Registrable Securities. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(k).

(l) The Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investors may reasonably request and registered in such names as the Investors may request.

(m) If requested by an Investor, the Company shall as soon as practicable (i) incorporate in a prospectus supplement or post-effective amendment such information as an Investor reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement if reasonably requested by an Investor holding any Registrable Securities.

(n) The Company shall use its commercially reasonable efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.

(o) The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company’s fiscal quarter next following the applicable Effective Date of a Registration Statement.

(p) The Company shall otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.

(q) Within two (2) Business Days after a Registration Statement which covers Registrable Securities is ordered effective by the SEC, the Company shall deliver to the transfer agent for such Registrable Securities (with copies to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A .

(r) Notwithstanding anything to the contrary herein, at any time after the Effective Date, the Company may delay the disclosure of material, non-public information concerning the Company the disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the Company and its counsel, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required (a “ Grace Period ”); provided, that the Company shall promptly (i) notify the Investors in writing of the existence of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not disclose the content of such material, non-public information to the Investors) and the date on which the Grace Period will begin, and (ii) notify the Investors in writing of the date on which the Grace Period ends; and, provided further, that no Grace Period shall exceed thirty (30) consecutive Trading Days and during any three hundred sixty five (365) day period such Grace Periods shall not exceed an aggregate of sixty (60) Trading Days and the first day of any Grace Period must be at least five (5) Trading Days after the last day of any prior Grace Period (each, an “ Allowable Grace Period ”). For purposes of determining the length of a Grace Period above, the Grace Period shall begin on and include the date the Investors receive the notice referred to in clause (i) and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) and the date referred to in such notice. The provisions of Section 3(g) hereof shall not be applicable during the period of any Allowable Grace Period. Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section 3(f) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Note Purchase Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale, prior to the Investor’s receipt of the notice of a Grace Period and for which the Investor has not yet settled.

(s) Neither the Company nor any Subsidiary or affiliate thereof shall identify any Investor as an underwriter in any public disclosure or filing with the SEC, the Principal Market or any Eligible Market and any Investor being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has under this Agreement or any other Transaction Document (as defined in the Note Purchase Agreement); provided , however , that the foregoing shall not prohibit the Company from including the disclosure found in the “Plan of Distribution” section attached hereto as Exhibit B in the Registration Statement.

(t) Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Investors in this Agreement or otherwise conflicts with the provisions hereof.

4. Obligations of the Investors .

(a) At least five (5) Business Days prior to the first anticipated Filing Date of a Registration Statement, the Company shall notify each Investor in writing of the information the Company requires from each such Investor if such Investor elects to have any of such Investor’s Registrable Securities included in such Registration Statement. It shall be a condition precedent to the obligations of the Company to complete any registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect and maintain the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.

(b) Each Investor, by such Investor’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor’s election to exclude all of such Investor’s Registrable Securities from such Registration Statement.

(c) Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of Section 3(f), such Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until such Investor’s receipt of copies of the supplemented or amended prospectus as contemplated by Section 3(g) or the first sentence of Section 3(f) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Note Purchase Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of Section 3(f) and for which the Investor has not yet settled.

(d) Each Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement.

5. Expenses of Registration . All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company. The Company shall also reimburse the Investors for the fees and disbursements of one legal counsel to the Investors in connection with registration, filing or qualification pursuant to Sections 2 and 3 of this Agreement which amount shall be limited to $25,000 for all registrations, filings or qualifications.

6. Indemnification . In the event any Registrable Securities are included in a Registration Statement under this Agreement:

(a) To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor, the directors, officers, partners, members, employees, agents, representatives of, and each Person, if any, who controls any Investor within the meaning of the 1933 Act or the 1934 Act (each, an “ Indemnified Person ”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or several (collectively, “ Claims ”), incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“ Indemnified Damages ”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“ Blue Sky Filing ”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, “ Violations ”). Subject to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person for such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(d); and (ii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

(b) In connection with any Registration Statement in which an Investor is participating, each such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (each, an “ Indemnified Party ”), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(c), such Investor shall reimburse the Indemnified Party for any legal or other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

(c) Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for all such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the Indemnified Person or Indemnified Party, as applicable, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. In the case of an Indemnified Person, legal counsel referred to in the immediately preceding sentence shall be selected by the Investors holding at least a majority in interest of the Registrable Securities included in the Registration Statement to which the Claim relates. The Indemnified Party or Indemnified Person shall reasonably cooperate with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such Claim or litigation and such settlement shall not include any admission as to fault on the part of the Indemnified Party. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.

(d) The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.

(e) The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

7. Contribution . To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the sale of such Registrable Securities pursuant to such Registration Statement.

8. Reports Under the 1934 Act . With a view to making available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration (“ Rule 144 ”), the Company agrees to:

(a) make and keep public information available, as those terms are understood and defined in Rule 144;

(b) file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

(c) furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.

9. Assignment of Registration Rights . The rights under this Agreement shall be automatically assignable by the Investors to any transferee of all or any portion of such Investor’s Registrable Securities if: (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act or applicable state securities laws; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein; and (v) such transfer shall have been made in accordance with the applicable requirements of the Note Purchase Agreement.

10. Amendment of Registration Rights . Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Required Holders; provided that any such amendment or waiver that complies with the foregoing but that disproportionately, materially and adversely affects the rights and obligations of any Investor relative to the comparable rights and obligations of the other Investors shall require the prior written consent of such adversely affected Investor. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the Company. No such amendment shall be effective to the extent that it applies to less than all of the holders of the Registrable Securities. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration (other than the reimbursement of legal fees) also is offered to all of the parties to this Agreement.

11. Miscellaneous .

(a) A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record owner of such Registrable Securities.

(b) Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); (iii) when sent, if sent by electronic mail; or (iv) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses, facsimile numbers and email addresses for such communications shall be:

If to the Company:

Arkados Group, Inc.

211 Warren Street, Suite 320

Newark, New Jersey 07103

Attention: Terrence DeFranco, CEO and Chairman

Email: tmdefranco@arkadosgroup.com

With a copy (for informational purposes only) to:

LKP Global Law, LLP

1901 Avenue of the Stars, Suite 480

Los Angeles, CA 90067

Telephone: (424) 239-1890

Attention: Mark Crone, Esq.

Email: mcrone@lkpgl.com

If to the Transfer Agent:

VStock Transfer

18 Lafayette Pl, Woodmere, NY 11598

(212) 828-8436

If to an Investor, to its address, facsimile number and/or email address set forth on the Schedule of Investors attached hereto, with copies to such Investor’s representatives as set forth on the Schedule of Investors, or to such other address, facsimile number and/or email address to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine or email containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

(c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

(d) All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(e) If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

(f) This Agreement, the other Transaction Documents (as defined in the Note Purchase Agreement) and the instruments referenced herein and therein constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, the other Transaction Documents and the instruments referenced herein and therein supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.

(g) Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.

(h) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(i) This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

(j) Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

(k) All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders, determined as if all of the outstanding Notes then held by the Investors have been converted for Registrable Securities without regard to any limitations on redemption and/or conversion of the Notes and the outstanding Warrants then held by Investors have been exercised for Registrable Securities without regard to any limitations on exercise of the Warrants.

(l) The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.

(m) This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

(n) The obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no provision of this Agreement is intended to confer any obligations on any Investor vis-à-vis any other Investor. Nothing contained herein, and no action taken by any Investor pursuant hereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated herein.

[Signature Page Follows]

IN WITNESS WHEREOF, each Investor and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

	COMPANY:

	ARKADOS GROUP, INC.

	By:	/s/ Terrence DeFranco
		Name: Terrence DeFranco
		Title: Chief Executive Officer

IN WITNESS WHEREOF, each Investor and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

	INVESTORS:

	AIP GLOBAL MACRO FUND, LP

	By:	/s/ Jay Bala
		Name: Jay Bala, CFA
		Title: Portfolio Manager

	AIP GLOBAL MACRO CLASS

	By:	/s/ Jay Bala
		Name: Jay Bala, CFA
		Title: Portfolio Manager

	AIP CANADIAN ENHANCED INCOME CLASS

	By:	/s/ Jay Bala
		Name: Jay Bala, CFA
		Title: Portfolio Manager

SCHEDULE OF INVESTORS

Investor	Investor Address, Email and Facsimile Number	Investor’s Representative’s Address, Email and Facsimile Number

AIP GLOBAL MACRO FUND, LP	AIP Asset Management, Inc. TD North Tower 77 King Street W, Suite 4140 Toronto, ON M5K1E7 Attn: Jay Bala

AIP GLOBAL MACRO CLASS	AIP Asset Management, Inc. TD North Tower 77 King Street W, Suite 4140 Toronto, ON M5K1E7 Attn: Jay Bala

AIP CANADIAN ENHANCED INCOME CLASS	AIP Asset Management, Inc. TD North Tower 77 King Street W, Suite 4140 Toronto, ON M5K1E7 Attn: Jay Bala

EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT

VStock Transfer

18 Lafayette Pl, Woodmere, NY 11598

(212) 828-8436

Re:

Arkados Group, Inc.

Ladies and Gentlemen:

[We are][I am] counsel to Arkados Group, Inc., a Delaware corporation (the “ Company ”), and have represented the Company in connection with that certain Note Purchase Agreement, dated as of May 1, 2017 (the “ Note Purchase Agreement ”), entered into by and among the Company and the Investors named therein (collectively, the “ Holders ”) pursuant to which the Company issued to the Holders senior secured convertible notes (the “ Notes ”) pursuant to which shares of the Company’s common stock, par value $0.0001 per share (the “ Common Stock ”) are issuable thereunder and warrants exercisable for shares of Common Stock (the “ Warrants ”). Pursuant to the Note Purchase Agreement, the Company also has entered into a Registration Rights Agreement with the Holders (the “ Registration Rights Agreement ”) pursuant to which the Company agreed, among other things, to register the resale of the Registrable Securities (as defined in the Registration Rights Agreement), including the shares of Common Stock issuable upon conversion of the Notes and upon exercise of the Warrants under the Securities Act of 1933, as amended (the “ 1933 Act ”). In connection with the Company’s obligations under the Registration Rights Agreement, on ____________ ___, the Company filed a Registration Statement on Form S-3 (File No. 333-_____________) (the “ Registration Statement ”) with the Securities and Exchange Commission (the “ SEC ”) relating to the Registrable Securities which names each of the Holders as a selling stockholder thereunder.

In connection with the foregoing, [we][I] advise you that a member of the SEC’s staff has advised [us][me] by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ ENTER TIME OF EFFECTIVENESS ] on [ ENTER DATE OF EFFECTIVENESS ] and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement.

This letter shall serve as our standing instruction to you that the shares of Common Stock are freely transferable by the Holders pursuant to the Registration Statement. You need not require further letters from us to effect any future legend-free issuance or reissuance of shares of Common Stock to the Holders as contemplated by the Company’s Irrevocable Transfer Agent Instructions dated [________], [_____].

	Very truly yours,

	[ ISSUER’S COUNSEL ]

	By:

CC: [ LIST NAMES OF HOLDERS ]

EXHIBIT B

SELLING STOCKHOLDERS

The shares of common stock being offered by the selling stockholders are those issuable to the selling stockholders pursuant to the terms of the convertible notes and upon exercise of the warrants. For additional information regarding the issuance of those convertible notes and warrants, see “Private Placement of Convertible Notes and Warrants” above. We are registering the shares of common stock in order to permit the selling stockholders to offer the shares for resale from time to time. Except for the ownership of the convertible notes and the warrants issued pursuant to the Note Purchase Agreement, the selling stockholders have not had any material relationship with us within the past three years.

The table below lists the selling stockholders and other information regarding the beneficial ownership of the shares of common stock by each of the selling stockholders. The second column lists the number of shares of common stock beneficially owned by each selling stockholder, based on its ownership of the convertible notes and warrants, as of ________, 2017, assuming conversion of all convertible notes and exercise of all warrants held by the selling stockholders on that date, without regard to any limitations on conversion, redemption or exercise.

The third column lists the shares of common stock being offered by this prospectus by the selling stockholders, which includes the shares of common stock issuable upon conversion of the convertible notes and upon exercise of the warrants held by such selling stockholder. The fourth column lists the percentage of shares of common stock beneficially owned by such selling stockholder after the completion of the offering, based on its ownership as of ________, based on ________ shares of common stock outstanding as of ________ and assuming the sale of all of the shares offered by the selling stockholders pursuant to this prospectus.

In accordance with the terms of a registration rights agreement with the selling stockholders, this prospectus generally covers the resale of at least the sum of (i) the maximum number of shares of common stock issued and issuable pursuant to the convertible notes as of the trading day immediately preceding the date the registration statement is initially filed with the SEC, and (ii) the maximum number of shares of common stock issued and issuable upon exercise of the related warrants as of the trading day immediately preceding the date the registration statement is initially filed with the SEC. Because the conversion price of the convertible notes and the exercise price of the warrants may be adjusted, the number of shares that will actually be issued may be more or less than the number of shares being offered by this prospectus.

Under the terms of the convertible notes and the warrants, a selling stockholder may not convert the convertible notes or exercise the warrants to the extent such conversion or exercise would cause such selling stockholder, together with its affiliates, to beneficially own a number of shares of common stock which would exceed 9.99% of our then outstanding shares of common stock following such conversion or exercise, excluding for purposes of such determination shares of common stock issuable upon conversion of the convertible notes which have not been converted and upon exercise of the warrants which have not been exercised. The number of shares in the second column does not reflect this limitation. The selling stockholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”

Name of Selling Stockholder

Number of Shares
of Common Stock
Beneficially
Owned Prior to
Offering(1)

Maximum
Number of Shares
of Common Stock
to be Sold
Pursuant to this
Prospectus(2)

Number of Shares
of Common Stock
Beneficially
Owned After
Offering(3)

Percentage of
Shares
Beneficially
Owned After
Offering(3)

[

(1) The number of shares of common stock owned are those “beneficially owned” as determined under the rules of the SEC, including any shares of common stock as to which the selling stockholder has sole or shared voting or investment power and any shares of common stock that the selling stockholder has the right to acquire within 60 days of ________ through the exercise of any option, warrant, or right.

(2) Includes both the convertible notes purchased by each selling stockholder in ________ and the shares of common stock issuable upon exercise of the warrants held by such selling stockholder.

(3) Assumes the sale of all of the shares offered by the selling stockholders pursuant to this prospectus.

PLAN OF DISTRIBUTION

We are registering the shares of common stock issuable pursuant to the terms of the convertible notes and upon exercise of the warrants to permit the resale of these shares of common stock by the holders of the convertible notes and warrants from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock.

The selling stockholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,

on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

in the over-the-counter market;

in transactions otherwise than on these exchanges or systems or in the over-the-counter market;

through the writing of options, whether such options are listed on an options exchange or otherwise;

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

an exchange distribution in accordance with the rules of the applicable exchange;

privately negotiated transactions;

short sales;

sales pursuant to Rule 144;

broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;

a combination of any such methods of sale; and

any other method permitted pursuant to applicable law.

If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

The selling stockholders may pledge or grant a security interest in some or all of the convertible notes, warrants or shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The selling stockholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.

The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $[ ] in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that a selling stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling stockholders against liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreements, or the selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholder specifically for use in this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.

Exhibit 10.7

No. 2017-C-O-XX

ARKADOS GROUP, INC.

COMMON STOCK PURCHASE WARRANT

THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IS SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS SET FORTH IN THIS CERTIFICATE. THIS WARRANT MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER, OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT.

WARRANT CERTIFICATE

THIS WARRANT CERTIFICATE (the "Warrant Certificate") certifies that for value received, ___________________ ( the "Holder"), is the owner of this warrant (the "Warrant"), which entitles the Holder to purchase at any time on or before the Expiration Date (as defined below) ____________________________________ (_______________) shares (the "Warrant Shares") of fully paid non-assessable shares of the common stock (the "Common Stock") of ARKADOS GROUP, INC., a Delaware corporation (the "Company"), at a purchase price per Warrant Share of One Dollar and No Cents ($1.00) (the "Purchase Price"), in lawful money of the United States of America by bank or certified check, subject to adjustment as hereinafter provided or by cashless exercise as provided in Section 2(a). This Warrant is issued for services rendered by Holder to Company.

WARRANT; PURCHASE PRICE .

This Warrant shall entitle the Holder to purchase the Warrant Shares at the Purchase Price. The Purchase Price and the number of Warrant Shares evidenced by this Warrant Certificate are subject to adjustment as provided in Article 6.

EXERCISE; EXPIRATION DATE .

(a) This Warrant is exercisable, at the option of the Holder, at any time after the date of issuance and on or before the Expiration Date (as defined below) by (i) delivering to the Company written notice of exercise (the "Exercise Notice"), stating the number of Warrant Shares to be purchased thereby, accompanied by bank or certified check payable to the order of the Company for the Warrant Shares being purchased or (ii) presentation and surrender of this Warrant to the Company at its principal executive offices with a written notice of the holder's intention to effect a cashless exercise, including a calculation of the number of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a "Cashless Exercise. In the event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder shall surrender this Warrant for that number of shares of Common Stock determined by multiplying the number of Warrant Shares to which it would otherwise be entitled by a fraction, (x) the numerator of which shall be the difference between the closing market price per share of the Common Stock on the last business day prior to the date the exercise is delivered to the Company (the “Current Market Price”) and the Purchase Price and (y) the denominator of which shall be the Current Market Price per share of Common Stock. Within ten (10) business days of the Company's receipt of the Exercise Notice accompanied by the consideration for the Warrant Shares being purchased, or a Cashless Exercise, the Company shall instruct its transfer agent to issue and deliver to the Holder a certificate representing the Warrant Shares being purchased. In the case of exercise for less than all of the Warrant Shares represented by this Warrant Certificate, the Company shall cancel this Warrant Certificate upon the surrender thereof and shall execute and deliver a new Warrant Certificate for the balance of such Warrant Shares.

(b) Expiration . The term "Expiration Date" shall mean 5:00 p.m., New York time, on the third (3 ^rd ) anniversary of the date set forth in the signature block of this Warrant or if such date in the State of New York shall be a holiday or a day on which banks are authorized to close, then 5:00 p.m., New York time, the next following day which in the State of New York is not a holiday or a day on which banks are authorized to close.

RESTRICTIONS ON TRANSFER .

(a) Restrictions . This Warrant, and the Warrant Shares or any other security issuable upon exercise of this Warrant may not be assigned, transferred, sold, or otherwise disposed of unless (i) there is in effect a registration statement under the Act covering such sale, transfer, or other disposition or (ii) the Holder furnishes to the Company an opinion of counsel, reasonably acceptable to counsel for the Company, to the effect that the proposed sale, transfer, or other disposition may be effected without registration under the Act, as well as such other documentation incident to such sale, transfer, or other disposition as the Company's counsel shall reasonably request.

(b) Legend . Any Warrant Shares issued upon the exercise of this Warrant shall bear substantially the following legend:

“The shares represented by this certificate have not been registered under the Securities Act of 1933, as amended. The shares have been acquired for investment and may not be offered, sold or otherwise transferred in the absence of an effective registration statement and with respect to the shares or an exemption from the registration requirements of said act that is then applicable to the shares, as to which a prior opinion of counsel acceptable to the issuer or transfer agent may be required.”

RESERVATION OF SHARES .

The Company covenants that it will at all time reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon exercise of this Warrant, such number of shares of Common Stock as shall then be issuable upon the exercise of this Warrant. The Company covenants that all shares of Common Stock which shall be issuable upon exercise of this Warrant shall be duly and validly issued and fully paid and non-assessable and free from all taxes, liens, and charges with respect to the issue thereof.

LOSS OR MUTILATION .

If the Holder loses this Warrant, or if this Warrant is stolen, destroyed or mutilated, the Company shall issue an identical replacement Warrant upon the Holder's delivery to the Company of a customary agreement to indemnify the Company for any losses resulting from the issuance of the replacement Warrant.

PROVISIONS REGARDING ADJUSTMENTS TO STOCK .

(a)

Stock Dividends, Subdivisions and Combinations . If at any time the Company shall:

(i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of Common Stock,

(ii) subdivide its outstanding shares of Common Stock into a larger number of shares of Common Stock, or

(iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock,

then (A) the number of shares of Common Stock for which this Warrant is exercisable into immediately after the occurrence of any such event shall be adjusted to equal the number of shares of Common Stock which a record holder of the same number of shares of Common Stock for which this Warrant is exercisable into immediately prior to the occurrence of such event would own or be entitled to receive after the happening of such event, and (B) the Purchase Price shall be adjusted to equal (x) the current Purchase Price immediately prior to the adjustment multiplied by the number of shares of Common Stock for which this Warrant is exercisable into immediately prior to the adjustment divided by (y) the number of shares of Common Stock for which this Warrant is exercisable into immediately after such adjustment.

(b) Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Purchase Price, the Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Holder, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, (ii) the Purchase Price at the time in effect for this Warrant and (iii) the number of shares of Common Stock and the amount, if any, or other property which at the time would be received upon the exercise of this Warrant.

(c) Notices of Record Date . In the event of any fixing by the Company of a record date for the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any shares of Common Stock or other securities, or any right to subscribe for, purchase or otherwise acquire, or any option for the purchase of, any shares of stock of any class or any other securities or property, or to receive any other right, the Company shall mail to the Holder at least thirty (30) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or rights, and the amount and character of such dividend, distribution or right.

(d) Merger, Consolidation, etc . In case of any capital reorganization or any reclassification of the capital stock of the Company or in case of the consolidation or merger of the Company with another corporation (or in the case of any sale, transfer, or other disposition to another corporation of all or substantially all the property, assets, business, and goodwill of the Company), the Holder of this Warrant shall thereafter be entitled to purchase the kind and amount of shares of capital stock which this Warrant entitled the Holder to purchase immediately prior to such capital reorganization, reclassification of capital stock, consolidation, merger, sale, transfer, or other disposition; and in any such case appropriate adjustments shall be made in the application of the provisions of this Section 6 with respect to rights and interests thereafter of the Holder of this Warrant to the end that the provisions of this Section 6 shall thereafter be applicable, as near as reasonably may be, in relation to any shares or other property thereafter purchasable upon the exercise of this Warrant.

(e) Fractional Shares . No certificate for fractional shares shall be issued upon the exercise of this Warrant, but in lieu thereof the Company shall purchase any such fractional shares calculated to the nearest cent or round up the fraction to the next whole share.

(f) Rights of the Holder . The Holder of this Warrant shall not be entitled to any rights of a shareholder of the Company in respect of any Warrant Shares purchasable upon the exercise hereof until such Warrant Shares have been paid for in full and issued to it. As soon as practicable after such exercise, the Company shall deliver a certificate or certificates for the number of full shares of Common Stock issuable upon such exercise, to the person or persons entitled to receive the same.

RepResentations and Warranties .

The Holder, by acceptance of this Warrant, represents and warrants to, and covenants and agrees with, the Company as follows:

(a) The Warrant is being acquired for the Holder's own account for investment and not with a view toward resale or distribution of any part thereof, and the Holder has no present intention of selling, granting any participation in, or otherwise distributing the same.

(b) The Holder is aware that the Warrant is not registered under the Act or any state securities or blue sky laws and, as a result, substantial restrictions exist with respect to the transferability of the Warrant and the Warrant Shares to be acquired upon exercise of the Warrant.

(c) The Holder is an accredited investor as defined in Rule 501(a) of Regulation D under the Act and is a sophisticated investor familiar with the type of risks inherent in the acquisition of securities such as the Warrant, and its financial position is such that it can afford to retain the Warrant and the Warrant Shares for an indefinite period of time without realizing any direct or indirect cash return on this investment.

NO IMPAIRMENT.

The Company shall not by any action including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the amount payable therefore upon such exercise immediately prior to such increase in par value, (b) take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and non assessable shares of Common Stock upon the exercise of this Warrant, and (c) use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. Upon the request of Holder, the Company will at any time during the period this Warrant is outstanding acknowledge in writing, in form satisfactory to Holder, the continuing validity of this Warrant and the obligations of the Company hereunder.

NO REGISTRATION RIGHTS.

There are no registration rights associated with this Warrant or the underlying Warrant Shares when issued.

10.

SUPPLYING INFORMATION.

The Company shall cooperate with Holder and each holder of Warrant Shares in supplying such information pertaining to the Company as may be reasonable necessary for such Holder and each holder of Warrant Shares to complete and file any information reporting forms presently or hereafter required by the Securities and Exchange Commission as a condition to the availability of an exemption from the Act for the sale of Warrant Shares.

LIMITATION OF LIABILITY.

No provision hereof, in the absence of affirmative action by Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of Holder hereof, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

MISCELLANEOUS .

(a) Transfer Taxes; Expenses . The Holder shall pay any and all underwriters' discounts, brokerage fees, and transfer taxes incident to the sale or exercise of this Warrant or the sale of the underlying shares issuable hereunder, and shall pay the fees and expenses of any special attorneys or accountants retained by it.

(b) Successors and Assigns . Subject to compliance with the provisions of Section 3, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant, and shall be enforceable by any such Holder.

(c) Notice . Any notice or other communication required or permitted to be given to the Company shall be in writing and shall be delivered by certified mail with return receipt or delivered in person against receipt, addressed to the Company at 211 Warren Street, Suite 320, Newark, New Jersey 07103.

(d) Governing Law . This Warrant Certificate shall be governed by, and construed in accordance with, the internal laws of the State of New Jersey, without reference to the conflicts of laws provisions thereof.

IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed as of the date set forth below.

Arkados Group, Inc.

By:	/s/ Terrence DeFranco
	Name:	Terrence DeFranco
	Title:	CEO

Issuance Date: May 1, 2017

ARKADOS GROUP, INC.

FORM OF EXERCISE OF WARRANT

No. 2017-C-O-XX

¨ The undersigned hereby elects to exercise this Warrant as to _____________ shares of the Common Stock of Arkados Group, Inc., a Delaware corporation, covered thereby. Enclosed herewith is a bank or certified check in the amount of $_____________ payable to the Company.

Delivery of exercise notice requiring a payment by check must be by national courier (Fedex, UPS, etc.) to:

Arkados Group, Inc.

211 Warren Street, Suite 320,

Newark, NJ 07103

Attn: Terrence DeFranco

¨ The undersigned hereby elects to effect a cashless exercise of this Warrant as to _____________ shares. The Company is authorized to deduct from the requested number exercised and to issue me that number of shares of its Common Stock determined by the formula set forth in Section 2(a) of the Warrant.

Please note: if the exercise involves a cashless exercise for the entire amount (i.e. no cash due the Company), please execute this notice in blue ink, scan and email to the Company’s general counsel via email at generalcounsel@arkadosgroup.com .

The shares should be sent to me at the address provided below.

Date:
			(Signature)

Name (Printed) :

Address:



	Social Security Number ( for individual holder) or Employer Identification Number (Tax ID) (for entity) :

Exhibit 10.8

FORM OF SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of May 1, 2017, by and between ARKADOS GROUP, INC. , a Delaware corporation, with headquarters located at 211 Warren Street, Suite 320, Newark, NJ 07103 (the “Company”), and _____________ _____________, with its address at __________________(the “Buyer”).

WHEREAS :

A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a 9% convertible note of the Company, in the form attached hereto as Exhibit A , in the aggregate principal amount of US$____________ (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, par value $0.0001 share, of the Company (the “Common Stock”), as well as a warrant to acquire up to __________ shares of Common Stock at an exercise price as set forth in that certain Common Stock Purchase Warrant issued by the Company of even date herewith, upon the terms and subject to the limitations and conditions set forth in such Note.

C. The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto; and

NOW THEREFORE , the Company and the Buyer severally (and not jointly) hereby agree as follows:

1. PURCHASE AND SALE OF NOTE .

a. Purchase of Note . On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto, subject to the express terms of the Note. In connection with the issuance of the Note, the Company shall issue that certain warrant to purchase _________ shares of Common Stock to Buyer (the “Warrant”).

b. Form of Payment . On the Closing Date, the Buyer shall pay the purchase price of $__________ (the “Purchase Price”) for the Note (with the understanding that Buyer shall withhold $__________ for its legal fees), by wire transfer of immediately available funds, in accordance with the Company’s written wiring instructions, against delivery of the Note, pursuant to the terms of the Note.

c. Closing Date . Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 6 and Section 7 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 5:00 P.M., Eastern Standard Time on or about May 1, 2017, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

2. REPRESENTATIONS AND WARRANTIES OF THE BUYER . The Buyer represents and warrants to the Company that:

a. Investment Purpose . As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note (including, without limitation, such additional shares of Common Stock, if any, as are issuable (i) on account of interest on the Note or (ii) as a result of the events described in Sections 1.3 and 1.4(g) of the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account for investment only and not with a view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided , however , that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

b. Reliance on Exemptions . The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

c. Information . The Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors. The Buyer and its advisors, if any, have been, afforded the opportunity to ask questions of the Company. Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer. Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below. The Buyer understands that its investment in the Securities involves a significant degree of risk, including the risk of loss of the Buyer’s entire investment. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.

d. Governmental Review . The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

e. Transfer or Re-sale . The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case). Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

f. Legends . The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

g. Authorization; Enforcement . This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

h. Accredited Investor Status. The Purchaser is (i) an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of Rule 501(a)(3) (an “Accredited Investor”), (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its affiliates or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related documents, and (iv) able to afford the entire loss of its investment in the Securities.

i. Residency. The Buyer is incorporated in the State of Kansas

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . The Company represents and warrants to the Buyer that:

a. Organization and Qualification . The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. Schedule 3(a) sets forth a list of all of the Subsidiaries of the Company and the jurisdiction in which each is incorporated. The Company and each of its Subsidiaries is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which its ownership or use of property or the nature of the business conducted by it makes such qualification necessary except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.

b. Authorization; Enforcement . (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

c. Capitalization . Except as disclosed in the SEC Documents, no shares are reserved for issuance pursuant to the Company’s stock option plans, no shares are reserved for issuance pursuant to securities (other than the Note) exercisable for, or convertible into or exchangeable for shares of Common Stock and sufficient shares are reserved for issuance upon conversion of the Note (as required by the Note and transfer agent share reserve letter). All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable. No shares of capital stock of the Company are subject to preemptive rights or any other similar rights of the shareholders of the Company or any liens or encumbrances imposed through the actions or failure to act of the Company. Except as disclosed in the SEC Documents, as of the effective date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe for, puts, calls, rights of first refusal, agreements, understandings, claims or other commitments or rights of any character whatsoever relating to, or securities or rights convertible into or exchangeable for any shares of capital stock of the Company or any of its Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries, (ii) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act and (iii) there are no anti-dilution or price adjustment provisions contained in any security issued by the Company (or in any agreement providing rights to security holders) that will be triggered by the issuance of the Note or the Conversion Shares. The Company has filed in its SEC Documents true and correct copies of the Company’s Certificate of Incorporation as in effect on the date hereof (“Certificate of Incorporation”), the Company’s By-laws, as in effect on the date hereof (the “By-laws”), and the terms of all securities convertible into or exercisable for Common Stock of the Company and the material rights of the holders thereof in respect thereto. The Company shall provide the Buyer a certification of this representation signed by the Company’s Chief Executive on behalf of the Company as of the Closing Date.

d. Issuance of Shares . The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

e. Acknowledgment of Dilution . The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note. The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

f. No Conflicts . The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, each as currently in effect, or (ii) violate or conflict with, or result in a material breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) to the Company’s knowledge result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). Neither the Company nor any of its Subsidiaries is in violation of its Certificate of Incorporation, By-laws or other organizational documents, as currently in effect, and neither the Company nor any of its Subsidiaries is in default (and no event has occurred which with notice or lapse of time or both could put the Company or any of its Subsidiaries in default) under, and neither the Company nor any of its Subsidiaries has taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party or by which any property or assets of the Company or any of its Subsidiaries is bound or affected, except for possible defaults as would not, individually or in the aggregate, have a Material Adverse Effect. The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in material violation of any law, ordinance or regulation of any governmental entity. Except as specifically contemplated by this Agreement and as required under the 1933 Act and any applicable state securities laws, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market or any third party in order for it to execute, deliver or perform any of its obligations under this Agreement, the Note in accordance with the terms hereof or thereof or to issue and sell the Note in accordance with the terms hereof and to issue the Conversion Shares upon conversion of the Note. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof. The Company is not in violation of the listing requirements of the Over-the-Counter Bulletin Board (the “OTCBB”), the OTCQB, OTC Pink or any similar quotation system, and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB, the OTCQB, OTC Pink or any similar quotation system, in the foreseeable future. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

g. SEC Documents; Financial Statements . The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “1934 Act”) (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”). The Company has made available to the Buyer true and complete copies of the SEC Documents, except for such exhibits and incorporated documents. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the statements made in any such SEC Documents is, or has been, required to be amended or updated under applicable law (except for such statements as have been amended or updated in subsequent filings prior the date hereof). As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved and fairly present in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). Except as set forth in the financial statements of the Company included in the SEC Documents, the Company has no liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business, and (ii) obligations under contracts and commitments incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in such financial statements, which, individually or in the aggregate, are not material to the financial condition or operating results of the Company. The Company is subject to the reporting requirements of the 1934 Act. For the avoidance of doubt, filing of the documents required in this Section 3(g) via the SEC’s Electronic Data Gathering, Analysis, and Retrieval system (“EDGAR”) shall satisfy all delivery requirements of this Section 3(g).

h. Absence of Certain Changes . There have been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.

i. Absence of Litigation . There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. Schedule 3(i) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its Subsidiaries, without regard to whether it would have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

j. Patents, Copyrights, etc . The Company and each of its Subsidiaries owns or possesses the requisite licenses or rights to use all patents, patent applications, patent rights, inventions, know-how, trade secrets, trademarks, trademark applications, service marks, service names, trade names and copyrights (“Intellectual Property”) necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); Except as disclosed in the SEC Documents, there is no claim or action by any person pertaining to, or proceeding pending, or to the Company’s knowledge threatened, which challenges the right of the Company or of a Subsidiary with respect to any Intellectual Property necessary to enable it to conduct its business as now operated (and, as presently contemplated to be operated in the future); to the best of the Company’s knowledge, the Company’s or its Subsidiaries’ current and intended products, services and processes do not infringe on any Intellectual Property or other rights held by any person; and the Company is unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and each of its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of their Intellectual Property.

k. No Materially Adverse Contracts, Etc . Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation which in the judgment of the Company’s officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company’s officers has or is expected to have a Material Adverse Effect.

l. Tax Status . The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax. None of the Company’s tax returns is presently being audited by any taxing authority.

m. Certain Transactions . Except for arm’s length transactions pursuant to which the Company or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Company or any of its Subsidiaries could obtain from third parties and other than the grant of stock options disclosed on Schedule 3(c), none of the officers, directors, or employees of the Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

n. Disclosure . There is no fact known to the Company (other than general economic conditions known to the public generally or as disclosed in the SEC Documents) that has not been disclosed in writing to the Purchaser that (i) would reasonably be expected to have a Material Adverse Effect, (ii) would reasonably be expected to materially and adversely affect the ability of the Company to perform its obligations pursuant to this Agreement.

o. Acknowledgment Regarding Buyer’ Purchase of Securities . The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby. The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities. The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

p. No Integrated Offering . Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

q. No Brokers . The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.

r. Permits; Compliance . The Company and each of its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate its properties and to carry on its business as it is now being conducted (collectively, the “Company Permits”), and there is no action pending or, to the knowledge of the Company, threatened regarding suspension or cancellation of any of the Company Permits. Neither the Company nor any of its Subsidiaries is in conflict with, or in default or violation of, any of the Company Permits, except for any such conflicts, defaults or violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received any notification with respect to possible conflicts, defaults or violations of applicable laws, except for notices relating to possible conflicts, defaults or violations, which conflicts, defaults or violations would not have a Material Adverse Effect.

s. Environmental Matters .

(i) The Company is in compliance with all applicable Environmental Laws in all respects except where the failure to comply does not have and could not reasonably be expected to have a Material Adverse Effect. For purposes of the foregoing: “Environmental Laws” means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other “Superfund” or “Superlien” law or any other applicable federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, the environment or any Hazardous Material. “Hazardous Material” means and includes any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal, treatment or emission of which is subject to any Environmental Law.

t. Title to Property . Except as disclosed in the SEC Documents the Company and its Subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects or such as would not have a Material Adverse Effect. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a Material Adverse Effect.

u. Internal Accounting Controls . Except as disclosed in the SEC Documents the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s board of directors, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

v. Foreign Corrupt Practices . Neither the Company, nor any of its Subsidiaries, nor any director, officer, agent, employee or other person acting on behalf of the Company or any Subsidiary has, in the course of his actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

w. Solvency . The Company (after giving effect to the transactions contemplated by this Agreement) is solvent ( i.e. , its assets have a fair market value in excess of the amount required to pay its probable liabilities on its existing debts as they become absolute and matured) and currently the Company has no information that would lead it to reasonably conclude that the Company would not, after giving effect to the transaction contemplated by this Agreement, have the ability to, nor does it intend to take any action that would impair its ability to, pay its debts from time to time incurred in connection therewith as such debts mature. Except as disclosed on Schedule 3.u, the Company did not receive a qualified opinion from its auditors with respect to its most recent fiscal year end and, after giving effect to the transactions contemplated by this Agreement, does not anticipate or know of any basis upon which its auditors might issue a qualified opinion in respect of its current fiscal year. For the avoidance of doubt any disclosure of the Borrower’s ability to continue as a “going concern” shall not, by itself, be a violation of this Section 3(w).

x. No Investment Company . The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.

y. Insurance . The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.

Breach of Representations and Warranties by the Company . If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of Default under Section 3.4 of the Note.

4. COVENANTS .

a. Best Efforts . The parties shall use their commercially reasonable best efforts to satisfy timely each of the conditions described in Section 6 and 7 of this Agreement.

b. Use of Proceeds . The Company shall use the proceeds from the sale of the Note first for the repayment of the convertible debt securities identified on Exhibit B hereto, and second for working capital and other general corporate purposes and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person (except in connection with its currently existing direct or indirect Subsidiaries).

c. Financial Information . The Company agrees to send or make available the following reports to the Buyer until the Buyer transfers, assigns, or sells all of the Securities: (i) within ten (10) days after the filing with the SEC, a copy of its Annual Report on Form 10-K its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; (ii) within one (1) day after release, copies of all press releases issued by the Company or any of its Subsidiaries; and (iii) contemporaneously with the making available or giving to the shareholders of the Company, copies of any notices or other information the Company makes available or gives to such shareholders. For the avoidance of doubt, filing the documents required in (i) above via EDGAR or releasing any documents set forth in (ii) above via a recognized wire service shall satisfy the delivery requirements of this Section 4(f).

d. Listing . The Company shall work in good faith to secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note. The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCBB, OTCQB, OTC Pink or any equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the NYSE MKT and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable.

Corporate Existence . So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTCBB, OTCQB, OTC Pink, Nasdaq, NasdaqSmallCap, NYSE or AMEX.

e. No Integration . The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

f. Failure to Comply with the 1934 Act . So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the 1934 Act; and the Company shall continue to be subject to the reporting requirements of the 1934 Act.

g. Trading Activities . Neither the Buyer nor its affiliates has an open short position (or other hedging or similar transactions) in the common stock of the Company and the Buyer agree that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the common stock of the Company.

h. Breach of Covenants. If the Company materially breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under Section 3.3 of the Note.

5. Transfer Agent Instructions . Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company warrants that: (i) no stop transfer instructions to give effect to Section 2(f) hereof (in the case of the Conversion Shares, prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to Rule 144 without any restriction as to the number of Securities as of a particular date that can then be immediately sold), will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement. Nothing in this Section shall affect in any way the Buyer’s obligations and agreement set forth in Section 2(g) hereof to comply with all applicable prospectus delivery requirements, if any, upon re-sale of the Securities. If the Buyer provides the Company, at the cost of the Buyer, with (i) an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act and such sale or transfer is effected or (ii) the Buyer provides reasonable assurances that the Securities can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.

6. CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL . The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

a. The Buyer shall have executed this Agreement and delivered the same to the Company.

b. The Buyer shall have delivered the Purchase Price in accordance with Section 1(b) above.

c. The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.

d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.

7. CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATION TO PURCHASE . The obligation of the Buyer hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:

a. The Company shall have executed this Agreement and delivered the same to the Buyer.

b. The Company shall have delivered to the Buyer duly executed Note (in such denominations as the Buyer shall request) in accordance with Section 1(b) above.

c. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Company’s Certificate of Incorporation, By-laws and Board of Directors’ resolutions relating to the transactions contemplated hereby, the form of which is attached hereto as Exhibit A.

e. No event shall have occurred which could reasonably be expected to have a Material Adverse Effect on the Company including but not limited to a change in the 1934 Act reporting status of the Company or the failure of the Company to be timely in its 1934 Act reporting obligations.

f. [The Conversion Shares shall have been authorized for quotation on the OTCBB, OTCQB or any similar quotation system and trading in the Common Stock on the OTCBB, OTCQB or any similar quotation system shall not have been suspended by the SEC or the OTCBB, OTCQB or any similar quotation system.]

g. The Buyer shall have received an officer’s certificate described in Section 3(c) above, dated as of the Closing Date.

8. GOVERNING LAW; MISCELLANEOUS .

a. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state or federal courts of Johnson County, Kansas. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens . The Company and Buyer waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

b. Counterparts; Signatures by electronic mail . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. This Agreement, once executed by a party, may be delivered to the other party hereto by electronic mail transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

c. Headings . The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

d. Severability . In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

e. Entire Agreement; Amendments . This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

f. Notices . All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Company, to:

ARKADOS GROUP, INC.

211 Warren Street, Suite 320

Newark, NJ 07103

E-mail: info@arkadosgroup.com

With a copy (which shall not constitute notice) to:

LKP Global Law, LLP

Attn: Mark Crone, Esq.

1901 Avenue of the Stars, Suite 480

Los Angeles, CA 90067

Emails: mcrone@lkpgl.com

If to the Holder, to:

______________________

With a copy (which shall not constitute notice) to:

Legal & Compliance, LLC

330 Clematis Street, Ste. 217

West Palm Beach, FL 33401

Attn: Chad Friend, Esq., LL.M.

E-mail: CFriend@LegalAndCompliance.com

Each party shall provide notice to the other party of any change in address.

g. Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, subject to Section 2(f), the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

h. Third Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

i. Survival . The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

j. Further Assurances . Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

k. No Strict Construction . The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

l. Remedies .

(i) The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

(ii) In addition to any other remedy provided herein or in any document executed in connection herewith, Borrower shall pay Holder for all costs, fees and expenses in connection with any litigation, contest, dispute, suit or any other action to enforce any rights of Holder against Borrower in connection herewith, including, but not limited to, costs and expenses and attorneys' fees, and costs and time charges of counsel to Holder. In furtherance of the foregoing, Borrower shall pay an amount equal to $25,000 to the Holder immediately upon the Holder’s filing of any litigation, contest, dispute, suit or any other action to enforce any rights of Holder against Borrower in connection herewith, which such amount shall be used to pay Holder’s attorneys’ fees, cost and expenses. Additional amounts shall be paid by Borrower to Holder immediately upon Borrower’s receipt of invoices from Holder’s attorney evidencing the charges and fees assessed in connection with any such litigation, contest, dispute, suit or any other action to enforce any rights of Holder and, upon receiving such invoices which indicate outstanding fees in excess of $20,000 at any time, Borrower shall promptly pay an additional $25,000 to Holder to be used in satisfaction of additional attorneys’ fees, and costs and time charges of counsel to Holder. Further, Borrower agrees to save and hold Holder harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such costs and expenses.

m. Publicity . The Company, and the Buyer shall have the right to review a reasonable period of time before issuance of any press releases, SEC, OTCQB (or other applicable trading market), or FINRA filings, or any other public statements with respect to the transactions contemplated hereby; provided , however , that the Company shall be entitled, without the prior approval of the Buyer, to make any press release or SEC, OTCQB (or other applicable trading market) or FINRA filings with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof).

[ - signature page follows - ]

IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

ARKADOS GROUP, INC.

By:	/s/ Terrence DeFranco
Name: Terrence DeFranco
Title: Chief Executive Officer

[BUYER]

By:
Name:
Title:

AGGREGATE SUBSCRIPTION AMOUNT:

Aggregate Principal Amount of Note:	US$__________

Aggregate Purchase Price:	US$__________

*The purchase price of $__________ (with the understanding that Buyer shall withhold $__________for its legal fees) shall be paid within a reasonable amount of time after the full execution of the Note and related transaction documents.

Exhibit A

(see attached)

Exhibit B

1. Convertible Promissory Note issued to Lucas Hoppel on October 28, 2016, in the principal amount of $38,500.00

2. Convertible Debenture issued to Peak One Opportunity Fund, L.P. on November 15, 2016, in the principal amount of $150,000.00

3. Convertible Promissory Note issued to Lucas Hoppel on January 27, 2017, in the principal amount of $38,500.00

Exhibit 10.9

NEITHER THE ISSUANCE NOR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

Principal Amount: $______________

Issue Date: May 1, 2017

PROMISSORY NOTE

FOR VALUE RECEIVED , ARKADOS GROUP, INC. , a Delaware corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of ______________ , or registered assigns (the “Holder”) the principal sum of $______________ (the “Principal Amount”), together with interest at the rate of nine percent (9%) per annum, at maturity or upon acceleration or otherwise, as set forth herein (the “Note”). The consideration to the Borrower from the Holder for this Note is $______________ (the “Consideration”) (with the understanding that Buyer shall withhold $12,000.00 for its legal fees) in United States currency, due to the original issuance discount of $______________. The maturity date shall be six (6) months from the Issue Date (the “Maturity Date”), and is the date upon which the principal sum, as well as any accrued and unpaid interest and other fees, shall be due and payable. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein. Any amount of principal or interest on this Note, which is not paid by the Maturity Date, shall bear interest at the rate of the lesser of (i) twenty four percent (24%) per annum or (ii) the maximum amount allowed by law, from the due date thereof until the same is paid (“Default Interest”). Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 365-day year and the actual number of days elapsed. All payments due hereunder (to the extent not converted into the Borrower’s common stock (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.

This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following additional terms shall also apply to this Note:

ARTICLE I. CONVERSION RIGHTS

1.1 Conversion Right . The Holder shall have the right at any time on or after an Event of Default, (as defined herein) (which shall continue uncured for five (5) business days after the Holder has delivered notice of such Event of Default to the Company except with respect to any Event of Default under Sections 3.1 or 3.2 under the Note) under the Note occurs, to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided , however , that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(g) hereof.

1.2 Conversion Price.

(a) Calculation of Conversion Price . The Conversion Price shall be the Variable Conversion Price (as defined herein) (subject to adjustment as further described herein). The "Variable Conversion Price" shall mean 60% multiplied by the Market Price (as defined herein) (representing a discount rate of 40%). “Market Price” means the lowest one (1) Trading Prices (as defined below) for the Common Stock during the thirty (30) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. “Trading Prices” means, for any security as of any date, the lowest traded price on the Over-the-Counter Pink Marketplace, OTCQB, or applicable trading market (the “OTCQB”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. www.Nasdaq.com) or, if the OTCQB is not the principal trading market for such security, on the principal securities exchange or trading market where such security is listed or traded or, if the lowest intraday trading price of such security is not available in any of the foregoing manners, the lowest intraday price of any market makers for such security that are quoted on the OTC Markets. If the Trading Prices cannot be calculated for such security on such date in the manner provided above, the Trading Prices shall be the fair market value as mutually determined by the Borrower and the holders of a majority in interest of the Notes being converted for which the calculation of the Trading Prices are required in order to determine the Conversion Price of such Notes. “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCQB, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. Each time an Event of Default (as defined herein) occurs while this Note is outstanding, an additional discount of five percent (5%) shall be factored into the Variable Conversion Price. Holder shall be entitled to deduct $500.00 from the conversion amount in each Notice of Conversion to cover Holder’s deposit fees associated with each Notice of Conversion.

Each time, while this Note is outstanding, the Borrower enters into a Section 3(a)(9) Transaction (as defined herein) (including but not limited to the issuance of new promissory notes or of a replacement promissory note), or Section 3(a)(10) Transaction (as defined herein), in which any 3 rd party has the right to convert monies owed to that 3 rd party (or receive shares pursuant to a settlement or otherwise) at a discount to market greater than the Variable Conversion Price in effect at that time (prior to all other applicable adjustments in the Note), then the Variable Conversion Price shall be automatically adjusted to such greater discount percentage (prior to all applicable adjustments in this Note) until this Note is no longer outstanding. Each time, while this Note is outstanding, the Borrower enters into a Section 3(a)(9) Transaction (including but not limited to the issuance of new promissory notes or of a replacement promissory note), or Section 3(a)(10) Transaction, in which any 3 rd party has a look back period greater than the look back period in effect under the Note at that time (currently a thirty (30) Trading Day look back period as described in this Section 1.2(a) applies), then the Holder’s look back period shall automatically be adjusted to such greater number of days until this Note is no longer outstanding. The Borrower shall give written notice to the Holder, with the adjusted Variable Conversion Price and/or adjusted look back period (each adjustment that is applicable due to the triggering event), within one (1) business day of an event that requires any adjustment described in the two immediately preceding sentences.

(b) Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note. The Borrower is required at all times to have authorized and reserved three times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non- assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.

If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.2 of the Note.

1.3 Method of Conversion .

(A) Mechanics of Conversion . Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time solely on or after the occurrence of an Event of Default under the Note, by submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

(a) Surrender of Note Upon Conversion . Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall, prima facie, be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

(b) Payment of Taxes . The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

(c) Delivery of Common Stock Upon Conversion . Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof.

(d) Obligation of Borrower to Deliver Common Stock . Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

(e) Delivery of Common Stock by Electronic Transfer . In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.3, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

(f) Failure to Deliver Common Stock Prior to Deadline . Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (other than a failure due to the circumstances described in Section 1.3 above, which failure shall be governed by such Section) the Borrower shall pay to the Holder $2,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (unless such failure results from war, acts of terrorism, an epidemic, or natural disaster). Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.3(f) are justified.

1.4 Concerning the Shares . The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.4 and who is an Accredited Investor. Except as otherwise provided (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

The legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Borrower so that the sale or transfer is effected or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Borrower does not accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.

1.5 Status as Shareholder . Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies (including, without limitation, (i) the right to receive Conversion Default Payments pursuant to Section 1.3to the extent required thereby for such Conversion Default and any subsequent Conversion Default and (ii) the right to have the Conversion Price with respect to subsequent conversions determined in accordance with Section 1.3) for the Borrower’s failure to convert this Note.

ARTICLE II. CERTAIN COVENANTS

2.1 Distributions on Capital Stock . So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

2.2 Restriction on Stock Repurchases . So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

ARTICLE III. EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

3.1 Failure to Pay Principal or Interest . The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise, and such breach continues for a period of five (5) days.

3.2 Conversion and the Shares . The Borrower fails to reserve a sufficient amount of shares of common stock as required under the terms of this Note (including Section 1.2(b) of this Note)(and such breach continues for a period of five (5) days from the time the Borrower should have known about the breach), fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within five (5) business days, either in cash or as an addition to the balance of the Note, and such choice of payment method is at the discretion of the Borrower.

3.3 Breach of Covenants . The Borrower breaches any material covenant or other material term or condition contained in this Note and such breach continues for a period of five (5) days after written notice thereof to the Borrower from the Holder or after ten (10) days after the Borrower should have been aware of the breach.

3.4 Breach of Representations and Warranties . Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith, shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note.

3.5 Receiver or Trustee . The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6 Judgments . Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $100,000, and shall remain unvacated, unbonded or unstayed for a period of ten (10) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.7 Bankruptcy . Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.

3.8 Delisting of Common Stock . The Borrower shall fail to maintain the listing or quotation of the Common Stock on the OTCQB, OTC Pink, any equivalent replacement exchange or marketplace, the Nasdaq Global Market, the Nasdaq Capital Market, the New York Stock Exchange, or the NYSE MKT.

3.9 Failure to Comply with the Exchange Act . The Borrower shall fail to comply with the reporting requirements of the Exchange Act (including but not limited to becoming delinquent in its filings), and/or the Borrower shall cease to be subject to the reporting requirements of the Exchange Act.

3.10 Liquidation . Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.11 Cessation of Operations . Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

3.12 Financial Statement Restatement . The Borrower replaces its auditor, or any restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note.

3.13 Reverse Splits . The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

3.14 Replacement of Transfer Agent . In the event that the Borrower replaces its transfer agent, and the Borrower fails to provide prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower that reserves the total amount of shares previously held in reserve for the Note with the Borrower’s immediately preceding transfer agent.

3.15 Cross-Default . Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the other financial instrument, including but not limited to all convertible promissory notes, currently issued, or hereafter issued, by the Borrower, to the Holder or other 3rd party (the “Other Agreements”), after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note, in which event the Holder shall be entitled to apply all rights and remedies of the Holder under the terms of this Note by reason of a default under said Other Agreement or hereunder, provided, however, that if the respective 3rd party has rights in the Other Agreements that are senior to that of the Holder (each a “Senior Creditor”), and the Senior Creditor has fully waived the applicable breach or default, then such event shall not be considered a default under this Note.

3.16 Inside Information . Any attempt by the Borrower or its officers, directors, and/or affiliates to transmit, convey, disclose, or any actual transmittal, conveyance, or disclosure by the Borrower or its officers, directors, and/or affiliates of, material non-public information concerning the Borrower, to the Holder or its successors and assigns, which is not immediately cured by Borrower’s filing of a Form 8-K pursuant to Regulation FD on that same date.

3.17 No bid . At any time while this Note is outstanding, the lowest Trading Prices on the OTCQB or other applicable principal trading market for the Common Stock is equal to or less than $0.0001.

3.18 No shop . So long as this Note is outstanding, the Borrower shall not enter into any transaction or arrangement with any party other than the Holder, structured in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(9) of the Securities Act (a “3(a)(9) Transaction”), without prior written consent of the Holder.

3.19 Failure to Repay Upon Qualified Offering . The Borrower fails to repay the Note, in its entirety, pursuant to the terms of the Note, with funds received from its next completed offering of $3,000,000.00 or more in gross proceeds to the Company (consummated on or after the Issue Date).

Upon the occurrence and during the continuation of any Event of Default specified in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16, 3.17, 3.18 and/or 3.19, the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to 140% (plus an additional 10% per each additional Event of Default that occurs hereunder) multiplied by the then outstanding entire balance of the Note (including principal and accrued and unpaid interest) plus Default Interest, if any, plus any amounts owed to the Holder pursuant to Sections 1.3(f) hereof (collectively, in the aggregate of all of the above, the “Default Sum”), and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.

If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect, subject to issuance in tranches due to the beneficial ownership limitations contained in this Note.

ARTICLE IV. MISCELLANEOUS

4.1 Failure or Indulgence Not Waiver . No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

4.2 Notices . All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, facsimile, or electronic mail addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery, upon electronic mail delivery, or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

If to the Borrower, to:

ARKADOS GROUP, INC.

211 Warren Street, Suite 320

Newark, NJ 07103

e-mail: info@arkadosgroup.com

If to the Holder:

_____________________

4.3 Amendments . This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented.

4.4 Assignability . This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

4.5 Cost of Collection . If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

4.6 Governing Law . This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state and/or federal courts of Johnson County, Kansas. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens . The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

4.7 Certain Amounts . Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

4.8 Remedies . The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

4.9 Prepayment . Notwithstanding anything to the contrary contained in this Note, the Borrower may prepay the amount outstanding under this Note, at any time during the initial 60 day period after the Issue Date, by making a payment to the Holder of an amount in cash equal to 115% multiplied by the total outstanding amount owed under the Note at such time of prepayment. Notwithstanding anything to the contrary contained in this Note, the Borrower may prepay the amount outstanding under this Note, at any time after the initial 60 day period after the Issue Date, by making a payment to the Holder of an amount in cash equal to 130% multiplied by the total outstanding amount owed under the Note at such time of prepayment. In order to prepay this Note, the Borrower shall provide notice to the Holder ten (10) business days prior to such respective prepayment date, and the Holder must receive such prepayment within twelve (12) business days of the Holder’s receipt of the respective prepayment notice, but not sooner than ten (10) business days from the date of notice (the “Prepayment Period”).

4.10 Section 3(a)(10) Transactions . If at any time while this Note is outstanding, the Borrower enters into a transaction structured in accordance with, based upon, or related or pursuant to, in whole or in part, Section 3(a)(10) of the Securities Act (a “3(a)(10) Transaction”), then a liquidated damages charge of 100% of the outstanding principal balance of this Note at that time, will be assessed and will become immediately due and payable to the Holder, either in the form of cash payment, an addition to the balance of the Note, or a combination of both forms of payment, as determined by the Holder.

4.11 [Intentionally Omitted].

4.12 Restriction on Section 3(a)(9) Transactions . So long as this Note is outstanding, the Borrower shall not enter into any 3(a)(9) Transaction with any party other than the Holder, without prior written consent of the Holder. In the event that the Borrower does enter into, or makes any issuance of Common Stock related to a 3(a)(9) Transaction while this Note is outstanding, a liquidated damages charge of 25% of the outstanding principal balance of this Note, but not less than $15,000, will be assessed and will become immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.

4.13 Piggyback Registration Rights . The Borrower shall include on the next registration statement the Borrower files with SEC (or on the subsequent registration statement if such registration statement is withdrawn), except with respect to the Borrower’s next underwritten public offering, all shares issuable upon conversion of this Note. Failure to do so will result in liquidated damages of 25% of the outstanding principal balance of this Note, but not less than $15,000, being immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.

4.14 Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Borrower or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Borrower shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the transaction documents with the Holder. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, prepayment rate, conversion look back periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage.

[signature page to follow]

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this May 1, 2017.

ARKADOS GROUP, INC.

By:	/s/ Terrence DeFranco
Name:	Terrence DeFranco
Title:	Chief Executive Officer

EXHIBIT A — NOTICE OF CONVERSION

The undersigned hereby elects to convert $ principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of ARKADOS GROUP, INC., a Delaware corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of May 1, 2017 (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.

Box Checked as to applicable instructions:

The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).

Name of DTC Prime Broker: Account Number:

The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:

_____________________________

Date of Conversion:	_____________
Applicable Conversion Price:	$_____________
Number of Shares of Common Stock to be Issued
Pursuant to Conversion of the Notes:	_________________
Amount of Principal Balance Due remaining
Under the Note after this conversion:	__________________

[ _____________________________ ]

By:
Name:
Title:
Date: